Business has improved the assessment of Ukraine’s tax system

12/ 12/ 2018

As part of the EBA Tax Index survey, 82 experts of the Tax Committee has evaluated the tax system of Ukraine.

The results of the survey showed that for the period April-October 2018, the Index reached 2.97 points (out of 5 possible), which is the highest result in the history of research since 2011. Although the index is still in the negative plane, for the first time its value came as close as possible to the neutral mark.

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The index was calculated based on the following 4 criteria:

• Quality of tax legislation;

• Complication/ easiness of tax administration;

• Fiscal pressure;

• Quality of tax service (work of tax authorities).

The total value of the Tax Index is an integrated calculation of the average value of each of the criteria. Below is the detailed review of the current Ukrainian tax system and the factors that influenced the results of the study according to experts of the European Business Association.


This year’s survey shows positive changes in experts’ assessments – 48% of experts consider the quality of Ukraine’s tax legislation to be satisfactory, while only 27% of respondents are dissatisfied with its quality and believe that it needs to be improved. In the similar period of the research in 2017, the share of those dissatisfied with the tax legislation amounted to 70%.

Interestingly, experts have divisive opinions on to which extent the current tax regime facilitates doing business – 33% of respondents rated the regime as favorable and 32% – as unfavorable. If we analyze the structure of respondents, mainly representatives of medium and small businesses consider the tax regime to be favorable, while representatives of large businesses take the opposite position.

Volodymyr Kotenko Chairman of the EBA Tax Committee
In fact, such results should not relax take the lawmakers off guard. Moreover, in combination with other indicators, they create grounds for concern. Thus, a significant percentage of respondents could not determine their attitude to the quality of legislation.

“This may indicate a hidden dissatisfaction with the quality of the rules. The list of “claims” to the legislation (constant changes, the volume of documents, contradictions, and ambiguous provisions) testifies to the existence of systemic defects that cannot be corrected by one smart regulatory act. But the recurrence of these claims indicates that they remain unresolved for a long time, which has a suppressive effect on investment sentiment.

The scores on the tax administration issues confirm such conclusions – despite the positive dynamics, almost half of the respondents consider the administrative procedures cumbersome. It is unfortunate that a number of these problematic issues (hasty introduction of new regulations, unclear rules, and explanations to them, the imperfection of electronic services) could be avoided if the improvements to the regulatory framework had been regularly and timely carried out without “assault” and “demonstration” campaigns.

Traditionally, attention is drawn to a high percentage of “neutral” assessments. The time and business performance will show whether it means indifference and despair, or, on the contrary, restrained optimism.”


Positive dynamics can be observed in the assessments of tax administration and reporting. 30% of experts assessed this process positively. Instead, 45% consider the procedure burdensome. Last year, 23% of respondents gave a positive assessment, and 66% gave a negative assessment.

The main factors that negatively affect the tax reporting and administration, in order of priority for respondents:

• Hasty introduction of new rules and lack of time to adapt to them;

• Imperfection of the electronic tax reporting system;

• Unclear rules and clarifications regarding the preparation of tax reporting and conducting of payments

• The amount of time spent preparing tax reporting and tax payments 

• Number of payments.


In April-October 2018, 29% of respondents felt the effects of fiscal pressure (last year this percentage reached 45%). 28% reported that the pressure was insignificant and 21% of experts did not encounter this phenomenon at all during the study period.

The business has observed the following displays of fiscal pressure:

• Unreasonable interpretations of tax legislation by controlling authorities and their non-acceptance of counter-arguments / explanations;

• Unreasonable information requests;

• “Offers” to pay the taxes in advance;

• Biased decisions of fiscal authorities.


The results of the survey showed that the number of dissatisfied with the quality of tax services has decreased – currently only 26% (last year – 52%). Instead, 33% of respondents confirmed that they were satisfied with the quality of tax services and another 40% showed a neutral attitude.


Traditionally, we ask our experts about their opinion on important steps that would significantly facilitate taxation procedures for doing business. This year the followings were suggested:

• Reducing of income tax and VAT rates;

• Prescribing legislation clearer to prevent ambiguity;

• Ensuring the stability and predictability of legislation, compliance with the principle of tax stability;

• Reducing the burden on wages;

• Fighting against smuggling and tax fraud;

• Transparency and simplification of the tax procedure, reduction of the tax burden;

• SFS reform and introduction of personal responsibility of tax auditors/inspectors;

• Change of personal taxation, revision of tax benefits, and special regimes.

We also asked our experts two additional questions to assess the impact of (1) increasing the minimum wage for the next year and (2) abolishing the maximum accrual base and introducing a regression scale for the single social security tax on their company’s activities.

The results show that 38% believe that increasing the minimum wage will negatively affect the activities of their company, 22% – positively, and 40% show a neutral attitude. Regarding the abolition of the maximum accrual base and the introduction of a regression scale for the single social security tax, the vast majority of respondents – 66% – assessed this step negatively, while only 8.5% supported it and 25.5% took a neutral position.

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