Ukraine ranks fourth in a newly released “tax hell” report by the 1841 Foundation, an organization based in the US with a focus on tax freedom and individual privacy or property rights.

The ranking, over half of which is based on how well a country’s economy does, is based on data from 2021 – before Russia’s Feb. 24, 2022, full-scale invasion of Ukraine – due to a lack of complete data afterward.

The report indicated a positive outlook for Ukraine’s future in terms of tax freedom and overall institutional improvements.

Ukraine has “started to implement reforms that will most likely be reflected in an improvement in its ranking,” said the report.

However, a representative from the foundation said that there was a “very slight deterioration in all qualitative categories” in 2021 except for “voice and accountability,” where it “falls significantly by several positions.”

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The World Bank defines “voice and accountability” as the perception of the extent to which a country’s citizens can participate in selecting their government as well as freedom of expression, freedom of association, and free media.

For context, the World Bank’s “voice and accountability” indicators in 2021 put Russia at -1.1, while Ukraine netted a 0.1 rating. Denmark, which performed well, has a voice and accountability rating of 1.5.

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Kyiv has been battling a Russian land assault on its northeastern Kharkiv region since May 10, when thousands of troops stormed the border, making their biggest territorial advances in 18 months.

Nevertheless, Russia, ranking ninth, was seen as less of a “tax hell” than Ukraine based on 2021 data.

Russia’s improvement over the previous year, when it held 4th place, was seen as “due more to the deterioration of other countries particularly Brazil, Nicaragua, Bolivia and Mexico, than to its own strengths.”

According to the report, the “tax hell index” is meant to “benchmark jurisdictions that combine high tax regimes with government mismanagement.”

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The report covers 82 countries in Europe and America, excluding those in Asia and Africa.

The foundation calculated the “tax hell” index by placing a 60 percent ratio on the “quantitative area,” which indicates how a country performs economically using data from the International Monetary Fund (IMF).

Meanwhile, the qualitative area — namely the quality of government — has a 40 percent ratio. This includes factors such as the rule of law, political stability and corruption using data from the World Bank.

While the report states that Putin further infringed on individual rights and the economy, it was unable to take into account data after the invasion, which will “surely have a strong negative impact on the place it holds in the future.”

On Oct. 13, the Parliamentary Assembly Council of Europe (PACE) recognized Russia’s leader, Vladimir Putin, as a dictator.

“In relation to Russia, besides an overall worsening situation of other countries causing it to fall on the list, there is a decrease in public spending as a percentage of GDP, which contributes to the overall quantitative improvement,” said a foundation representative.

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According to the representative, the foundation extracted raw data from the IMF and World Bank for its calculations.

According to IMF reports in 2021, while the revenue-to-GDP ratio of Ukraine and Russia are closely matched at 36.9 and 36.7 percent respectively, the gross government debt-to-GDP ratio is higher in Ukraine at 48.9 percent compared to Russia’s 16.5. According to data from 2023, Ukraine’s debt-to-GDP ratio rose to 88.1 percent, while Russia’s ratio is at 21.2.

The report states that the ranking was not purely based on quantitative measurements such as tax income and debts to GDP ratio, but also on overall personal freedom and government quality.

Therefore, countries like Denmark received a low score and are therefore not considered a “tax hell,” despite having a high tax rate due to better government quality and legal stability.

Ukraine’s northern neighbor, Belarus, retains the top place at the foundation’s “tax hell” ranking, followed by Venezuela and Argentina.

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