Discussion on “Reforming the State Tax Service through the Prism of Integrity of Taxpayers and Taxpayers”

On November 12, 2020, a high-level discussion on “Reforming the State Tax Service through the Prism of Integrity of Taxpayers and Taxpayers” organized by the Ukrainian Network of Integrity and Compliance (UNIC) took place.

Tetyana Korotka, Deputy Business Ombudsman of Ukraine, member of the UNIC Executive Committee moderated the discussion.

Among the speakers there were:

• Oleksiy Lyubchenko, Chairman of the State Tax Service of Ukraine
• Yevhen Oleynikov, First Deputy Chairman of the State Tax Service of Ukraine
• Natalia Kalenichenko, Deputy Chairman of the State Tax Service of Ukraine
• Enrico Aav, Senior Economist, International Monetary Fund
• Olga Savran, Manager of Anti-Corruption Network for Eastern Europe and Central Asia (ACN), OECD, UNIC Executive Committee Member
• Ivan Sakal, CFO of AgroFusion
• Arne Jacobsson, Director/Long-term Expert in Ukraine Swedish-Ukrainian Partnership for Modern and Efficient Tax Service – METS

Tatiana Korotka defined the purpose of the meeting:

"It is not a secret that almost 50% of the

Business Ombudsman Council - Ukraine

appeals are complaints to the tax service. But it should be noted that over the past 5 years, the nature of these complaints has changed significantly. If earlier we observed gross violations by the tax authorities, now the consideration of these complaints requires higher qualification. At the same time, we have recently seen an increasing trend in the number of complaints that taxpayers are included in the list of risky companies. We note that at least 20% of these appeals are unfounded, and the source of business problems is the lack of compliance in the company's business processes. Therefore, I consider today's discussion to be very timely. It can help companies to establish business processes in such a way that the tax administration as little as possible to make claims to taxpayers. These claims are sometimes quite reasonable”.

The discussion began with a presentation of the vision of reforming the State Tax Service by its representatives. The Head and Deputies of the State Tax Service spoke about the achievements in the introduction of new administrative and digital services, as well as the introduction of algorithms for checking the integrity of taxpayers for VAT refunds, which radically changed the procedure for VAT refunding. The State Tax Service sees changing the approach to the taxpayers and introducing customer-oriented services among important priorities of the reforms. Besides, they are working on reducing the number of tax audits by introducing a clear risk profile and changing the approach to selecting the objects of such audits.

Enrico Aav, IMF representative highlighted reputation and trust as a basis for effective interaction between taxpayers and the Tax Service, as well as the importance of implementing a culture of tax. Olga Savran, Manager of the OECD Anti-Corruption Network in Eastern Europe and Central Asia, stressed that timely and full payment of taxes is a manifestation of direct democracy and demonstrates the level of trust of citizens and private businesses to public authorities. She also mentioned that based on international practice, tax services rather focus on monitoring and inspecting taxpayers who do not want to play by the rules, while supporting and integrity business and taxpayers.

The Financial Director of the Agrofusion company Ivan Sakal told about real cases between tax authorities and agricultural companies in the Mykolaiv region. He noted the importance of compliance policies implementation especially for the company's foreign economic activity. He also stressed the important role of the UNIC, that not only helps companies to set up and implement compliance, but also is one of the main methodological centers on this topic in the country, as well as a powerful driving force for compliance culture in the Ukrainian business environment.

"Other associations are lobbying organizations that promote the business interests of their members. UNIC is an educational and methodological network… It is worth analyzing the algorithm by which companies are checked for integrity and accepted into UNIC, and perhaps these algorithms coincide with the vision of honest companies by the Tax Service. In this case, the participants of the network should be considered as allies through the eyes of the tax authorities,” - Ivan Sakal said.

Arne Jakobsso who had experience of reforming and working in the Tax service of Sweden, mentioned Swedish practice of building a relationship between taxpayers and tax authorities, which is based equally on trust, integrity and responsibility on both sides.

In conclusion, the Head of the State Tax Service of Ukraine Oleksiy Lyubchenko expressed support for honest business:

"Today we have brought our dialogue between the State Tax Service and business to a new level. This partnership is mutually beneficial - we work for white business against the shadow one. White business can count on us completely, and our forms of tax control will depend entirely on the taxpayer’s history and integrity”.

The participants agreed on further steps, including developing a taxpayer risk profile, exploring different approaches and algorithms for checking companies for integrity, including UNIC practices, engaging in to join dialogue businesses that actively practice a culture of integrity and compliance.

The video of the event is on the official UNIC’s Youtube channel: https://youtu.be/a5njjXjfMHQ