In 2007, the authorities claimed that they returned 78 percent of VAT claimed and, at the beginning of 2008, then-Prime Minister Yulia Tymoshenko announced that the VAT refund problem would be resolved by April 2008. Despite these declarations, claims for refunds have grown and currently exceed Hr 30 billion ($3.75 billion).
In practise, the tax authorities make every effort to reject the amounts claimed as a refund. They don’t accept tax returns, delay tax audits and reject a substantial portion of refund claims. In many cases such rejections do not appear to have a legal basis, but challenging such a decision in court is time-consuming and expensive. Even if the taxpayer wins in court and proves the right to a refund, enforcing the court decision is problematic, and it is increasingly difficult to obtain money from the state.
The global economic crisis has exacerbated the state’s ability to collect sufficient amount of revenues, and now the authorities recognize that there is a shortage of funds to satisfy all refund claims. The current government has now proposed the provision of VAT refunds through government domestic loan bonds (VAT bonds).