Business has experienced no changes in the tax system
This is evidenced by the results of the Tax Index survey, conducted regularly by the European Business Association among the experts from its member-companies. The new wave of survey over the period from November 2018 through March 2019 shows that the feelings of the experts on the matter have remained the same – the Index was 2.98 points out of the 5 points possible. As a comparison, last year’s Index was 2.97 points. Index is still below the neutral tax value of 3 points, which it hasn’t surpassed at all in the history of the research conducted starting from 2011.
We have observed certain topical improvements in the respondents’ assessments, which, nevertheless, haven’t impacted the overall result. Thus, 57% of experts consider the tax legislation in Ukraine satisfactory, whilst during the last fiscal period that number was 48%. Those who are not satisfied with it make up 23% of the respondents, while 20% more consider the legislation to be of high quality.
During the last wave of survey, the opinions of experts concerning the extent to which the current tax regime helps in conducting business have split into two camps, with the large majority – 68% – of the respondents evaluating the regime as beneficial to business, and 32% – as curbing the progress in the field.
As to the evaluations of the process of tax administration and tax reporting we see a negative shift of opinions. This time around, only 13% of experts evaluated the process in a positive way. Instead, 37% consider the process to be burdensome. Last year a positive evaluation was given by 30% of respondents, and a negative one – by 45%. The percentage of the respondents who gave a neutral response has increased.
Below is a list of the main factors that negatively impact the process of tax reporting and tax administration, in the order of priority as cited by the respondents:
- The amount of time spent to prepare tax reporting and tax payments
- Unclear rules and clarifications regarding the preparation of tax reporting and conducting of payments
- Rapid implementation of new rules and lack of time for adaptation
- Imperfection of the electronic tax reporting system
- The amount of payments
Over that period the effects of fiscal pressure have been experienced by 29% of the respondents (same as over the previous period). 28% reported the pressure to be almost imperceptible and 18% have not experienced any fiscal pressure at all during the period in question.
Among the displays of fiscal pressure that remain, the business has cited:
- Unjustified interpretations of the tax legislature by the regulatory bodies and their unresponsiveness to counterarguments and explanations
- Biased decisions made by the fiscal authorities
- Technical issues related to working with the State Fiscal Service’s server during the submission of the tax reports and the registration of tax invoices
- “Offers” to pay taxes in advance
The results of the survey show that the amount of those who are unsatisfied with the quality of the tax services has remained the same as last year, at 24%. 35% of those surveyed have confirmed that they are satisfied with the quality of services provided, and 41% have voiced a neutral opinion.
Traditionally we ask our experts about the necessary steps that would, in their eyes, noticeably facilitate conducting business in terms of fiscal sphere.
This year, these suggestions have been voiced to be such:
- Substantial cuts to the strain put on the wage fund, which would allow for an increase in the tax base
- Transparency and the simplification of the procedure of tax charges, reduction of tax burden
- A guarantee of the stability and predictability of tax legislation, as well as keeping up the stability principle
- Combating smuggling and tax fraud
- Reduction of VAT and income tax rates
- The reduction of the amount of taxes and non-tax payments and the facilitation of the process of their calculation and administration
We have also asked our experts two additional questions – if there is a need in the Ukrainian tax legislation for drastic changes or if there is only a need for compliance with the current legislation (1) and what could the consequences of implementing the BEPS Plan in Ukraine be (2).
As it turns out, 87% of the experts think that the Ukrainian tax legislation only needs the meticulous compliance to the norms of the existing legislation and only 21% are convinced that radical change is needed. As to the consequences of implementing the BEPS Plan in Ukraine, 50% of those surveyed thinks that it will lead to the increase of the pressure only upon the unscrupulous taxpayers, and 26% expect the increase of the pressure for all companies. An additional 40% are convinced that there is a point in waiting for the review of the reduced/facilitated tax regimes, and 35% think that a return of the income from “offshore” jurisdictions to Ukraine is to be expected.
The signals from business are not ambiguous: the government must concentrate upon the guarantee of the meticulous compliance to the norms of the legislation, without losing sight of the need to improve the taxation rules and regulations and the need to make them simpler. The tax charges and payments have to stop being a kind of an “obstacle track” for taxpayers and has to become a convenient routine process. The reduction of the tax pressure, that was experienced by 29% of the respondents, has to become one of the government’s priorities.
For your information:
During the calculations traditionally 4 criteria have been taken into account:
- The quality of tax legislation;
- Complication/easiness of the tax administration;
- Fiscal pressure;
- The quality of the fiscal services.
The overall value of the Tax Index is the integrity of an average value calculation of each of the aforementioned factors. Overall, 104 experts from the Tax Committee of the Association have been surveyed.