Business neutrally evaluated Ukraine’s tax regime for the first time

24/ 12/ 2021

This is evidenced by a new wave of the Tax Index Survey 2021, conducted by the European Business Association together with EY in Ukraine. For the first time in the decade-long Index history, its integrated value has reached the neutral plane with 3.01 points out of 5 possible. In the previous period, the tax index amounted to 2,90 points. View the presentation The increased integrated value is largely due to a significant improvement in the fiscal pressure evaluation as one of the index components. Survey participants rated the situation regarding fiscal pressure at 3.63 points out of 5 possible. Thus, the number of respondents who did not notice any displays of pressure on their company has doubled compared to last year and amounted to 36% in 2021. Another 14% reported that fiscal pressure was almost absent. The number of respondents who reported significant displays of pressure also decreased slightly to 19% (32% in the previous period). In this regard, businesses experienced most often the unreasoned interpretation of tax legislation by regulatory bodies and baseless information requests. On the other hand, the quality of tax legislation received the lowest score among the index components with a slight decrease compared to last year – 2.71 points out of 5 possible. Thus, the number of unsatisfactory evaluations remains unchanged at the level of 30% for two years in a row. The majority of respondents tended to evaluate the quality of tax legislation as satisfactory – 65% and only 5% of our experts believe that the quality is good. The tax administration and tax reporting were also given moderate evaluations. Only 12% of respondents consider this procedure easy. Another 28% believe that it is complex, although the majority of respondents, namely 64%, rate it satisfactorily. The main negative factor to the easiness of tax administration & reporting is the rapid implementation of new rules and lack of time for adaptation as reported by the business. Although previously the factors of the amount of time spent on taxes and the number of payments prevailed. The number of respondents satisfied with the quality of tax services decreased slightly from 24% to 18%. Meanwhile, the majority of respondents, including 61%, gave a satisfactory evaluation, and another 21% said they were dissatisfied with the work of tax services. Svitlana Mykhailovska. EBA Deputy Director for Advocacy. I would like to note that the survey was conducted on the eve of the mass blockade of VAT invoices in December, so the Tax Index does not reflect the full picture for 2021. In particular, companies have begun to actively seek help and support in unblocking VAT invoices, and also, we have all witnessed several high-profile tax decisions based on the results of inspections. So, we would like to point out that despite the general improvement in the situation with fiscal pressure, business is still facing blatant abuses from the tax service at the end of the year. The number of respondents who believe that the current tax regime has contributed to the development of their business remains dramatically low. These are only 6% (7% last year). As for the tax areas that need improvement, the experts put personal income tax as the first priority, then corporate income tax, and finally the value-added tax. To make the tax regime more favorable for businesses in quarantine, it is proposed to introduce recognition of the value of primary documents in electronic form, no fines for late registration of tax invoices and minimization of tax audits, timeliness of the State Tax Services answers to taxpayers inquiries. Volodymyr Kotenko. Head of Tax and Law, EY in Ukraine, Chair of the EBA Tax Committee. Tax issues remain to be irritating for majority of businesses. The taxpayers still complain about the same systemic defects and tax practices in Ukraine. However, the business community has formed a clear opinion of the priority changes required for tax legislation. 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; Complexity/easiness of tax administration; Fiscal pressure; The quality of tax services. Altogether, 101 tax & finance experts took part in the current wave of the survey conducted from November 15 till December 3. The survey partner - EY in Ukraine. Analytical partner - Gemius. The survey partner Analytical partner

This is evidenced by a new wave of the Tax Index Survey 2021, conducted by the European Business Association together with EY in Ukraine. For the first time in the decade-long Index history, its integrated value has reached the neutral plane with 3.01 points out of 5 possible. In the previous period, the tax index amounted to 2,90 points.

View the presentation

The increased integrated value is largely due to a significant improvement in the fiscal pressure evaluation as one of the index components. Survey participants rated the situation regarding fiscal pressure at 3.63 points out of 5 possible. Thus, the number of respondents who did not notice any displays of pressure on their company has doubled compared to last year and amounted to 36% in 2021. Another 14% reported that fiscal pressure was almost absent.

The number of respondents who reported significant displays of pressure also decreased slightly to 19% (32% in the previous period). In this regard, businesses experienced most often the unreasoned interpretation of tax legislation by regulatory bodies and baseless information requests.

On the other hand, the quality of tax legislation received the lowest score among the index components with a slight decrease compared to last year – 2.71 points out of 5 possible. Thus, the number of unsatisfactory evaluations remains unchanged at the level of 30% for two years in a row. The majority of respondents tended to evaluate the quality of tax legislation as satisfactory – 65% and only 5% of our experts believe that the quality is good.

The tax administration and tax reporting were also given moderate evaluations. Only 12% of respondents consider this procedure easy. Another 28% believe that it is complex, although the majority of respondents, namely 64%, rate it satisfactorily. The main negative factor to the easiness of tax administration & reporting is the rapid implementation of new rules and lack of time for adaptation as reported by the business. Although previously the factors of the amount of time spent on taxes and the number of payments prevailed.

The number of respondents satisfied with the quality of tax services decreased slightly from 24% to 18%. Meanwhile, the majority of respondents, including 61%, gave a satisfactory evaluation, and another 21% said they were dissatisfied with the work of tax services.

Svitlana Mykhailovska EBA Deputy Director for Advocacy

I would like to note that the survey was conducted on the eve of the mass blockade of VAT invoices in December, so the Tax Index does not reflect the full picture for 2021. In particular, companies have begun to actively seek help and support in unblocking VAT invoices, and also, we have all witnessed several high-profile tax decisions based on the results of inspections. So, we would like to point out that despite the general improvement in the situation with fiscal pressure, business is still facing blatant abuses from the tax service at the end of the year.

The number of respondents who believe that the current tax regime has contributed to the development of their business remains dramatically low. These are only 6% (7% last year). As for the tax areas that need improvement, the experts put personal income tax as the first priority, then corporate income tax, and finally the value-added tax.

To make the tax regime more favorable for businesses in quarantine, it is proposed to introduce recognition of the value of primary documents in electronic form, no fines for late registration of tax invoices and minimization of tax audits, timeliness of the State Tax Service’s answers to taxpayers’ inquiries.

Volodymyr Kotenko Head of Tax and Law, EY in Ukraine, Chair of the EBA Tax Committee

Tax issues remain to be irritating for majority of businesses. The taxpayers still complain about the same systemic defects and tax practices in Ukraine. However, the business community has formed a clear opinion of the priority changes required for tax legislation.

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; Complexity/easiness of tax administration;
Fiscal pressure;
The quality of tax services.

Altogether, 101 tax & finance experts took part in the current wave of the survey conducted from November 15 till December 3. The survey partner – EY in Ukraine. Analytical partner – Gemius.

The survey partner