Ex­perts warn of re­lapse to cor­rupt ways in VAT re­funds

Kyiv Post - - Business Focus - BY GABRIEL HARDY- FRANÇON HARDYFRANC­[email protected] Time (Hours) Statu­tory Tax Rate Tax Base Tax Rate (per­cent of Profit) 29.56 Ad­di­tional Notes

"Is Ukraine’s sickly econ­omy at risk of a re­lapse? Anna Derevyanko, the ex­ec­u­tive di­rec­tor of the Eu­ro­pean Busi­ness As­so­ci­a­tion, or EBA, is afraid so.

The source of the mal­ady could be a re­turn of prob­lems in the ad­min­is­tra­tion of the value added tax, or VAT, the Ukrainian busi­ness­woman said in an of­fi­cial state­ment posted on the EBA’s web­site on Jan. 17. “The rep­e­ti­tion of old VAT is­sues” and the re­im­burse­ment de­lays it causes could re­sult in com­pa­nies fac­ing “se­ri­ous prob­lems,” such as “fi­nanc­ing their own op­er­at­ing ac­tiv­i­ties, in­clud­ing the pay­ment of wages to em­ploy­ees.”

The gov­ern­ment says de­lays in the reg­is­tra­tion of tax in­voices and set­tle­ment ad­just­ments are the cause of holdups in the process. But the EBA, a voice for over 1,000 busi­nesses in Ukraine, says the prob­lems lie with the process of re­im­burs­ing VAT it­self.

In July 2017, Ukraine launched an au­to­matic sys­tem to re­im­burse ex­porters, who pay the tax in ad­vance when send­ing goods abroad.

Derevyanko fur­ther ex­pressed her deep con­cerns on Jan. 24 in re­gards to re­cent de­vel­op­ments at the cus­toms where there have also been ma­jor de­lays.

Ukraine’s dif­fer­ent types of taxes

92.0 22% Gross Salaries

"Busi­nesses have the im­pres­sion that we are re­turn­ing to man­ual ways of ad­just­ing the cus­toms value and in­dica­tive prices for goods, as (it) used to be done by cus­toms of­fi­cers be­fore the amend­ments to the cus­toms code. And all the achieve­ments — those changes in de­ter­min­ing the meth­ods of cus­toms value — slipped, in fact, to a quasi-in­dica­tive price de­ter­mi­na­tion."

Iryna Stanislavs­ka, head of the press ser­vice of the Busi­ness Om­buds­man Coun­cil in Kyiv, an agency that mon­i­tors the gov­ern­ment’s ac­tions re­lated to busi­ness in Ukraine, says that over­all, “since the launch of the au­to­matic sys­tem for VAT re­im­burse­ment in July 2017, we’ve re­ceived 1,133 com­plaints about the sus­pen­sion of tax in­voices from busi­nesses.

“We’ve helped the ma­jor­ity of them, and as a re­sult state bod­ies re­funded a to­tal of Hr 235 mil­lion ($8.4 mil­lion) to our com­plainants. Our re­cent sta­tis­tics show that the num­ber of ap­peals on this is­sue in­creased dur­ing the last quar­ter of 2018.”

The per­spec­tive of go­ing back to the way things used to be is not ap­peal­ing. Ro­man Ostro­vekh, di­rec­tor of the road de­part­ment of the Ukrainian branch of Dan­ish lo­gis­tics com­pany DSV, told the Kyiv Post that “the VAT in Ukraine has been known in the past to be a ma­jor niche for cor­rup­tion to thrive.”

“As be­fore, only a very short list of com­pa­nies could ben­e­fit from re­im­burse­ment — then given on a caseby-case ba­sis up un­til 2015 — what would hap­pen then was that com­pa­nies could only get re­im­bursed to the con­di­tion that they pre­vi­ously bribed of­fi­cials.”

What seems to be a step back­wards in the cus­toms ad­min­is­tra­tion is wor­ry­ing busi­nesses of com­ing back to a cor­rupt sys­tem based on bribes.

Ac­cord­ing to the ad­min­is­tra­tion, it might make a re­quest for ad­di­tional doc­u­ments and there­fore de­lay the cus­toms clear­ance for up to 10 days, the EBA says. But the as­so­ci­a­tion says that, based on the cus­toms code, this should solely ap­ply if the doc­u­ments sub­mit­ted be­fore the cus­toms clear­ance con­tain dis­crep­an­cies.

De­lays in the cus­toms and a mal­func­tion­ing VAT sys­tem could be se­ri­ously detri­men­tal to the Ukrainian econ­omy. Losses could be counted in bil­lions of hryv­nias, crip­ple grow­ing com­pa­nies that want to ex­pand in­ter­na­tion­ally, and send a neg­a­tive sig­nal to Ukraine’s in­ter­na­tional part­ners will­ing to in­vest in the coun­try."

A truck is wait­ing for cus­toms' in­spec­tion at the en­trance of Odesa's har­bor, on Aug. 29, 2016. (Volodymyr Petrov)

Newspapers in English

Newspapers from Ukraine

© PressReader. All rights reserved.