You're reading: Ukraine’s fiscal services body undermines 600 million euros in support from EU

Ukraine is undermining its financial support from the European Union as it continues to delay the liquidation of the State Fiscal Service.

According to Sergei Solodchenko, the head of the state body, it won’t be possible to fully liquidate the Fiscal Services of Ukraine before the end of 2020, which was a requirement of the EU to provide Ukraine with 600 million euros of financial support, a part of 1.2 billion euros of low-interest loans from the EU.

“It’s possible to liquidate the tax police, but the whole State Fiscal Service — there would be difficulties. I think, we won’t make it,” Solodchenko said in an interview with online publication Liga on Sept. 29.

The State Fiscal Service is the state body that, after it was divided into tax and customs services in December 2018, mostly employs officers with policing powers to enforce and prosecute tax evasion.

Many tax and customs employees from the Fiscal Service still have to be transferred to the new services and this is what takes time since some employees are currently on parental leave, others need to recuperate property from within occupied territories, Solodchenko said. The transfer of weapons used by the agency is also time-consuming, according to him.

“All this requires a lot of time and adherence to certain procedures,” he said.

Just two months ago, however, in July 2020, Prime Minister Denys Shmyhal said that the service would be liquidated and stripped of its policing powers by the end of the year.

Sergey Fursa, financial analyst with Ukrainian investment firm Dragon Capital, views the delay as just another incident in the disastrous relations between Ukraine and its international partners like the International Monetary Fund.

The administration under Ukraine’s President Volodymyr Zelensky has been accused of failing to undertake the necessary reforms to comply with reforms for a $5.5-billion-loan from the IMF, after failing to deliver judicial reforms following the failure to prosecute judge Pavlo Vovk and the Hryhoriy and Ihor Surkis brothers. And now the same seems to be happening with the EU requirements, Fursa said.

“To be honest, I don’t believe we will receive these funds in the near future… due to the fact that all cooperation with our Western partners is now frozen,” Fursa told the Kyiv Post. “The program with the IMF is not on track… so I don’t think we will receive these funds from the EU.”

The State Fiscal Service has been a controversial government organization as it was frequently accused of misuse of government funds and power.

And despite the scheduled liquidation of the tax police, an investigation by Radio Svoboda found that the department’s budget had been doubled to around Hr 1 billion ($36 million), leading to allegations of corruption.