Ukraine’s lawmakers are using a clerical error as an opportunity to push for a new, cleaner tax authority in Ukraine.
The mistake took place in 2016, when the Verkhovna Rada approved a new Tax Code. The code had an article that liquidated the tax police – which, however, wasn’t supposed to come in force since Rada deputies hadn’t agreed on its replacement, the financial police.
But the final part of the Tax Code that specifies which articles come in force confused article numbers and gave the green light to the article liquidating the tax police.
It made many wonder if the tax police were de facto liquidated as of Jan. 1, when the new Tax Code came in force.
They were proven wrong when two weeks into the new year the parliament’s Committee for Tax and Customs ruled that it was a technical error and the tax police continue their work.
Those who back its replacement with a new financial police hope it’s not for long.
Financial police vs. tax police
The Ministry of Finance and several lawmakers have been drafting a bill that would see the tax police, widely criticized as corrupt and heavyhanded, replaced with a new financial police force with less powers.
The tax police, who inspect businesses, have often been accused of accepting bribes from businesses in order to stay open. The new financial police would not have “enforcement” powers and instead focus on analysis in the sector.
But according to Samopomich Party member Andriy Zhurzhiy, parliament has been stalling on adopting the legislative changes.
Zhurzhiy said introducing the financial police into Ukraine’s tax system has the potential to fight corruption in the sector.
He hoped that the technical mistake will speed up the process of adopting the bill on the financial police.
The Ministry of Finance has long been pushing for the liquidation of the tax police, a move backed by the International Monetary Fund.
As part of the changes, it wants the financial police to report directly to the Ministry of Finance instead of the State Fiscal Service.
As well as liquidating the tax police, Zhurzhiy says the bill calls for the removal of Ukraine’s Security Service and the economic department of the National Police from working in the tax system, all of whom would be replaced with the financial police.
If passed, the bill would see the workforce cut from 15,000 to 2,500.
Zhurzhiy hopes the law will be adopted within the coming two months or so, but expects opposition from parliament, including from the Bloc of President Petro Poroshenko, the Rada’s biggest faction.
“I do have doubts that it will get through parliament easily, because we are expecting resistance from people who control some of the law enforcement authorities today,” he said.
He expects the Ministry of Finance to bring the bill before the Cabinet of Ministers next week.
Other Tax Code changes
Meanwhile, a raft of amendments to the Tax Code to improve Ukraine’s investment climate, signed by Poroshenko on Dec. 30, will come into effect this year.
Among the changes was the introduction of a single register for value added tax refunds.
It had strong backing in government and within the business community as a key part of the anti-corruption package of tax changes that were introduced.
The single VAT register will replace the two previously existing registers, which saw some taxpayers paid on time while others had their payments delayed.
As part of amendments targeted at improving transparency, the State Fiscal Service must publish information on reimbursements.
“It’s very important that the information regarding VAT refunds will be placed on the website of the State Fiscal Service and the Ministry of Finance, so the taxpayer can check this information,” Tetyana Prokopchuk, vice president of policy at the American Chamber of Commerce in Ukraine, said.
Another key change is the introduction of an electronic office for taxpayers.
“The main idea is that the taxpayer can submit …their documentation (and)… obtain information from the State Fiscal Service of Ukraine electronically,” Prokopchuk said.
“That will reduce time, paperwork and speed up the process of communication.”
She said now that amendments were approved, the main focus would be their proper implementation.
