Business has worsened the assessment of the current state of taxation in Ukraine

21/ 12/ 2020

The European Business Association together with EY Ukraine has conducted a new wave of the Tax Index Survey that has resulted in 2.90 points out of 5 possible (2.95 in the previous period). It means that the integrated index continues to remain in the negative area. The results of the Tax Index Survey show the disappointing stability in tax experts assessment for the second year in a row. Thus, throughout the history of the study starting from 2011, the index has never crossed a 3-point mark. View the presentation Among the components of the tax index, the quality of the tax legislation has received the worst score, namely, 2.74 points, while the situation regarding the fiscal pressure has received the best result - 3.13 points out of 5 possible. Despite the general improvement in the assessment of the fiscal pressure, compared to the beginning of the year, the number of respondents who reported significant displays of pressure has increased to 32% (24% in the previous period). Other 23% of respondents reported that the fiscal pressure was hardly noticeable, and 18% did not notice any signs of pressure. The previous wave of the survey showed 49% and 11%, respectively. The majority, namely 27% of experts, assessed the pressure level as neutral. The respondents reported that the following fiscal pressure methods are still imposed on the business: Unreasoned interpretation of tax legislation by the regulatory bodies and information queries; “Proposals” to pay in advance; Fines for delayed reporting incurred by technical failures of the STS server; Accrual of controversial penalties, burdensome inspections, etc. There is an alarming polarization of experts assessments of the quality of tax services. Although the majority of respondents, namely 52%, indicated a satisfactory level of services, the number of satisfied taxpayers decreased to 24% against 32% in the previous period. The number of dissatisfied also increased to 24% (17% at the beginning of the year). Svitlana Mykhailovska. EBA Deputy Director for Advocacy. This year, many radical changes were adopted in the taxation system, they have affected many taxes and, of course, have added to the worries of companies. Businesses had to adapt quickly to the new rules, so it is not a surprise that tax experts are complaining about the rules being incomprehensible. Often the explanations of rules are not clear enough or absent altogether. The hasty introduction of new requirements has also contributed to the dissatisfaction. Predictability and stability are critical for doing business, especially when it comes to implementing tax innovations. Traditionally, the lowest assessments were given to the quality of tax legislation and the tax administration and reporting processes. Thus, the number of dissatisfied with the quality of tax legislation remained unchanged from the previous period - 30%. The share of satisfied experts has increased slightly - from 7% in the previous period to the current 10%. Other 60% of experts consider the quality of Ukraines tax legislation to be satisfactory. The majority of the respondents, namely 60%, assessed the preparation of tax reporting and tax administration at a satisfactory level, while 30% believe that it is burdensome. Only 12% of the respondents consider this procedure easy. Experts point to the following factors that are negatively affecting the preparation of tax reporting and administration, in order of priority: 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 Hasty implementation of the new rules and lack of time for adaptation The imperfection of the electronic tax reporting system The number of payments It is worth noting that The number of payments, the traditional leader of this anti-rating, took the last place this time. The first place was given to the amount of time spent on reporting. This result is understandable, as during the period of the survey significant changes in tax legislation were adopted and that has increased the burden on staff responsible for preparing the tax reports. In general, only 7% of experts believe that the current tax regime promotes the development of their business. To improve the business environment in the context of taxation, experts have identified three priority areas for further improvement - corporate income tax, value-added tax, and personal income tax. Volodymyr Kotenko. Head of Tax and Law Practice at EY Ukraine, Chairman of the EBA Tax Committee. Traditionally low assessments of the tax legislation quality and devastating 7% that consider the tax system favorable should encourage the authorities to engage in a meaningful dialogue with the public regarding the desired changes. The survey has shown that the business has a position on the necessary changes, so it is time to start a respective dialogue. For reference: The EBA Tax Index has been conducted since 2011. 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. Altogether, 91 tax and financial experts took part in the current wave of the survey. Survey Partner Analytic Partner

The European Business Association together with EY Ukraine has conducted a new wave of the Tax Index Survey that has resulted in 2.90 points out of 5 possible (2.95 in the previous period). It means that the integrated index continues to remain in the negative area. The results of the Tax Index Survey show the disappointing stability in tax experts’ assessment for the second year in a row. Thus, throughout the history of the study starting from 2011, the index has never crossed a 3-point mark.

View the presentation

Among the components of the tax index, the quality of the tax legislation has received the worst score, namely, 2.74 points, while the situation regarding the fiscal pressure has received the best result – 3.13 points out of 5 possible.

Despite the general improvement in the assessment of the fiscal pressure, compared to the beginning of the year, the number of respondents who reported significant displays of pressure has increased to 32% (24% in the previous period). Other 23% of respondents reported that the fiscal pressure was hardly noticeable, and 18% did not notice any signs of pressure. The previous wave of the survey showed 49% and 11%, respectively. The majority, namely 27% of experts, assessed the pressure level as neutral.

The respondents reported that the following fiscal pressure methods are still imposed on the business:

Unreasoned interpretation of tax legislation by the regulatory bodies and information queries;
“Proposals” to pay in advance;
Fines for delayed reporting incurred by technical failures of the STS server;
Accrual of controversial penalties, burdensome inspections, etc.

There is an alarming polarization of experts’ assessments of the quality of tax services. Although the majority of respondents, namely 52%, indicated a satisfactory level of services, the number of satisfied taxpayers decreased to 24% against 32% in the previous period. The number of dissatisfied also increased to 24% (17% at the beginning of the year).

Svitlana Mykhailovska EBA Deputy Director for Advocacy

This year, many radical changes were adopted in the taxation system, they have affected many taxes and, of course, have added to the worries of companies. Businesses had to adapt quickly to the new rules, so it is not a surprise that tax experts are complaining about the rules being incomprehensible. Often the explanations of rules are not clear enough or absent altogether. The hasty introduction of new requirements has also contributed to the dissatisfaction. Predictability and stability are critical for doing business, especially when it comes to implementing tax innovations.

Traditionally, the lowest assessments were given to the quality of tax legislation and the tax administration and reporting processes. Thus, the number of dissatisfied with the quality of tax legislation remained unchanged from the previous period – 30%. The share of satisfied experts has increased slightly – from 7% in the previous period to the current 10%. Other 60% of experts consider the quality of Ukraine’s tax legislation to be satisfactory.

The majority of the respondents, namely 60%, assessed the preparation of tax reporting and tax administration at a satisfactory level, while 30% believe that it is burdensome. Only 12% of the respondents consider this procedure easy. Experts point to the following factors that are negatively affecting the preparation of tax reporting and administration, in order of priority:

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
Hasty implementation of the new rules and lack of time for adaptation
The imperfection of the electronic tax reporting system
The number of payments

It is worth noting that “The number of payments”, the traditional leader of this anti-rating, took the last place this time. The first place was given to the amount of time spent on reporting. This result is understandable, as during the period of the survey significant changes in tax legislation were adopted and that has increased the burden on staff responsible for preparing the tax reports.

In general, only 7% of experts believe that the current tax regime promotes the development of their business. To improve the business environment in the context of taxation, experts have identified three priority areas for further improvement – corporate income tax, value-added tax, and personal income tax.

Volodymyr Kotenko Head of Tax and Law Practice at EY Ukraine, Chairman of the EBA Tax Committee

Traditionally low assessments of the tax legislation quality and devastating 7% that consider the tax system favorable should encourage the authorities to engage in a meaningful dialogue with the public regarding the desired changes. The survey has shown that the business has a position on the necessary changes, so it is time to start a respective dialogue.

For reference:

The EBA Tax Index has been conducted since 2011.

During the calculations, traditionally 4 criteria have been taken into account: