Business has evaluated the work of tax authorities
A new wave of the survey has shown the stability of tax experts’ sentiment for the period of November 2019 – March 2020. The index reached 2.95 points out of possible 5 (2.90 in the previous period). It has remained in the negative area throughout the whole history of the survey since 2011.
As reported by the survey, the tax and financial experts complained about the quality of tax legislation of Ukraine and evaluated the situation regarding fiscal pressure on the business.
The results of the survey indicate occasional improvements in the respondents’ estimates, which led to a certain increase in the integral index. The most significant growth has occurred in the evaluation of fiscal pressure on the business. Thus, almost half of the respondents, namely 49% reported no significant displays of fiscal pressure, and another 11% of experts did not encounter any pressure at all. In the previous wave, these were 29% and 9%, respectively. During this period, only 24% of respondents (28% in the last period) felt significant displays of fiscal pressure.
The business has experienced the following displays of fiscal pressure:
- Baseless information requests;
- “Offers” to pay the taxes in advance;
- Delayed reporting due to technical failures of the STS servers causes penalties;
- Unfair penalties, burdensome inspections, etc.
Positive dynamics are also observed in the evaluation of the quality of tax services by experts. The number of dissatisfied taxpayers significantly decreased to 17% (29% in the previous period). At the same time, the number of respondents who evaluated the quality of services as satisfactory increased to 51%, compared to 38% in the last wave. Another 32% said they were satisfied with the quality of tax services.
It is obvious that the transformation from the fiscal organization to the service provider declared by the new Tax Service gives its first results. The survey demonstrates a significant improvement in the evaluation of the fiscal pressure and quality of tax services by the EBA experts. We hope that this positive trend will intensify in the next wave of research if the Tax Service continues to build partnership relations with taxpayers and improve the quality of its services.
Traditionally, the lowest scores are given to such components of the index as the quality of tax legislation and the process of tax administration and reporting. Thus, the share of those satisfied with the quality of tax legislation has halved from 15% in the previous period to the current 7%. The number of dissatisfied also increased slightly – up to 30%. Another 63% of experts consider the quality of tax legislation of Ukraine satisfactory.
Only 6% of respondents believe that the current tax regime has contributed to the development of their business compared to 11% in the previous period. Also, only 11% of respondents rated the process of tax reporting and tax administration positively, while 34% found the procedure burdensome. The experts ranked the main factors that negatively affect tax reporting and administration, in order of priority:
- The number of payments
- The imperfection of the electronic tax reporting system
- The amount of time spent preparing tax reporting and tax payments.
- Rapid implementation of new rules and lack of time for adaptation
- Unclear rules and clarifications regarding the preparation of tax reporting and conducting of payments
Crisis circumstances have influenced the evaluation of the quality of tax legislation. Thus, entrepreneurs have traditionally complained about high rates of taxes and fees, including the level of payroll taxation, complexity, and constant changes in tax legislation. However, in times of crisis, entrepreneurs expected greater responsiveness from legislators and greater determination to support the business. Unfortunately, to this day, these expectations remain undelivered: neither changes themselves nor the speed of their implementation met the needs of entrepreneurs.
«In addition to the impact of the crisis, it is worth mentioning that for several months now the business has been uncertain about large-scale tax changes adopted by the Parliament last December. It is unclear whether they will take effect at all, and if so, when and in what form? Undoubtedly, such circumstances irritate entrepreneurs and influence their evaluation of the quality of tax legislation».
For the reference:
Four criteria are traditionally taken into account in the evaluation:
- The quality of tax legislation;
- Complication/easiness of tax administration;
- Fiscal pressure;
- Quality of tax service.
The total value of the Tax Index is an integral calculation of the average of each factor above. Altogether 105 tax and financial experts from member companies of the Association have participated in the current survey.
All EBA studies can be viewed on the website.