While Ukrainian tax and customs laws formally align with EU best practices, their enforcement tells a different story. Instead of ensuring compliance through clear regulations and fair legal procedures, authorities rely on discretionary controls that shift the burden of proof onto businesses.
A key area of concern is VAT administration, where tax authorities frequently reject VAT credit claims, placing the burden on companies to prove their legitimacy before they can account for the reported VAT credit. This practice contradicts EU standards, where tax authorities must demonstrate wrongdoing rather than presuming businesses are engaged in fraud. Similarly, customs administration suffers from excessive discretion, with importers often pressured into accepting inflated customs valuations. Challenging these decisions requires costly and time-consuming litigation, making it difficult for businesses to operate with confidence.
Beyond financial losses, these practices create a climate of unpredictability and corruption. Despite legal protections that should safeguard taxpayers, enforcement is often arbitrary, and businesses are left vulnerable to unfair penalties and administrative roadblocks. The persistence of these discretionary controls stifles economic growth and discourages investment, as companies must navigate a system where compliance does not guarantee fair treatment.
Reforming Ukraine’s tax and customs administration requires a shift away from the presumption of guilt and toward a transparent, law-based approach. Until these systemic issues are addressed, businesses will continue to face financial uncertainty, making it harder for the economy to thrive. The report provides an in-depth analysis of these challenges and highlights the urgent need for change to foster a fair and predictable business environment.