When starting a conversation about the National Income Strategy for 2024-2030 (NSD), we should first dwell on the authorship of this document. Analytical centers of Ukraine, which deal with the issue of relations between government and business, and taxation problems, wrote about this in their appeal. A total of seven well-known analytical centers: CASE Ukraine, the Chamber of Tax Consultants, the Institute of Socio-Economic Transformation, the Institute of Finance and Law, the Institute of Tax Reforms, the Tax Group of the Economic Expert Platform, the Advanter Group Analytical Center.
It is impossible to understand the essence of the confrontation between business and government around this National Strategy without understanding its authorship. So, what the experts write:
“First of all, it should be noted that for the first time in recent years, the document was developed in closed mode, according to the information we have, without any consultations with scientists, civil society and business representatives. Such a non-inclusive process significantly worsens the quality of documents, undermines their legitimacy, and complicates the implementation of relevant proposals”.
In recent years, we have become accustomed to the fact that the responsible officials, having closed their hearts, were nevertheless forced to consult with independent experts and business. But many people remember how the Tax Code named after Mr. Azarov was created and then adopted. It is difficult to assess all the consequences of such destructive documents. It is impossible to take into account the role of all the businesses destroyed by this document, the catastrophically sick economic situation and the number of officials who got rich. And it’s not only that the Tax Code simply had gross technical errors, it’s not only that it had a bellicose-fiscal nature, and to a large extent damaged the economic prosperity of the beginning of zero. And accordingly, it became the anti-flag of the Maidan in 2004-2005.
The philosophy of this document was based on the original Marxist illusion that money grows on trees (“Money Tree” by the great Clifford Cymak), and the top prize will go to whoever harvests the first crop. The authors of the Tax Code solved one question: how to harvest a bigger harvest from money trees. And then – as Louis XIV allegedly said: “After us, at least the flood.” We will return to this famous statement.
And here the question inevitably arises: why did the authors of the National Strategy refuse to involve experts and independent business in its creation? And here we will have to stop our attention on the philosophy of this document. It is all very difficult, but it is important to understand its individual articles.
The authors of the National Strategy repeatedly emphasize that they are only trying on European legislation to Ukrainian conditions. Back when the Tax Code was being discussed, Azarov’s team constantly repeated these mantras: we only use European models. And today’s authors of the National Strategy accurately repeat all the “conciliatory clichés” of a person who fled to Russia. Azarov is no longer with us, but the Azarov region, as it was, has not gone anywhere. Why?
There was such an old joke: a person from a baby carriage factory takes out spare parts to have a baby carriage for a child at home. But no matter how much he collects these spare parts, the result is not a baby carriage, but a machine gun. It’s the same with tax documents in Ukraine: our officials can pray to Strasbourg, bow to Europe, shout about the Polish or Hungarian experience – but it’s all a tragifarce.
For a comment on how the National Income Strategy for 2024-2030 will affect Ukrainian businessmen, “FAKT” IA turned to Volodymyr Dubrovsky, the senior economist of CASE Ukraine, the chief expert of the tax reform group of the Economic Expert Platform.
“Currently, the fiscal policy in Ukraine works according to the principle of “presumption of guilt”, embedded in the corporate culture of tax officials even under Azarov. Taxpayers are taught that they, as it were, protect public interests against predatory and greedy entrepreneurs (the tax department mainly deals with business) who, according to Soviet traditions, by default they are considered enemies of society.
This approach particularly suits tax officials not only because it justifies any illegal actions, such as demanding overpayment of income tax, by “public interests”, but also as an actual indulgence for “milking business” for one’s own pocket.
This turns discretion, which cannot be completely removed from the administration process, into a weapon for extortion and other abuses, thus encouraging tax officials and those who lobby their interests (the same Ministry of Finance) to defend and at the slightest opportunity to expand discretionary opportunities and powers, such as , provided by the National Income Strategy.
So, no matter how hard a bona fide taxpayer tries to comply with the legislation, he can still be accused of underpayment of taxes with the corresponding consequences, unless he agrees with the tax office. noted Volodymyr Dubrovskyi.
However, the problem is not only Azarov’s “corporate tax culture”. All interested parties are well aware that entrepreneurs are not covered by the main principle of civilized justice: the presumption of innocence. Any entrepreneur is initially guilty, and in any court of Ukraine, in fact, the entrepreneur has the duty to prove his innocence. But that’s half the trouble.
The Law of Ukraine “On Civil Service” contains an article that allows imposing individual financial responsibility on civil servants for damage caused to them. Yes, most often losses to businesses are caused not by one, but by several officials, but if such a practice were to take place, as it actually exists in European countries, then the situation in Ukraine would be completely different. It should be noted that for more than twenty years of existence of this norm, as far as I know, it has no judicial practice.
In fact, there is a situation where for taxpayers there is a de facto “presumption of innocence in their non-payment”, and for officials there is a de facto presumption of impunity. By the way, this is precisely why business is so eager to join government institutions and is ready to pay huge sums of money for a place in it: only a powerful status or a powerful “roof” can provide real protection against the arbitrariness of officials or security forces.
In this regard, Volodymyr Dubrovsky emphasized in our conversation:
“Deputies are probably unaware that, as any specialist knows, this is basically impossible as long as there is an income tax that is discretionary in nature.
Any experienced accountant or CFO knows many ways to hide profits or show them when needed. And similarly, any experienced tax inspector can always find something to complain about in the calculation of the financial result. Therefore, no one can be sure that paying this tax is correct.
Unfortunately, as long as there is an income tax and the current VAT with its administration and the criterion of “economic activity”, clear a priori criteria for determination are impossible, because no one knows whether he is following the law or not.”
The operation of a purely Soviet system, under which an official can actually be punished only by his superior, means the presence of legalized arbitrariness. Characteristically, this causes a much more terrible blow to the budget than all the shortfalls of the business. The problem in this case also lies in the fact that the official is absolutely not interested in the ultimate goal of tax collection – replenishment of the budget: he is neither cold nor hot about it. On the one hand, the official enjoys impunity, and on the other hand, he does not care what the result of his actions will be: the main thing is to fill his own pocket. And if at the same time the business will be destroyed, if revenues to the budget will drop sharply or even disappear – it is of no use here. As they said in the game “Field of Miracles”: “I played, but I didn’t guess a single letter.” An official who is controlled only by his boss is an ideal thief: unpunished, all-powerful, the most important thing he only shares with the superiors.
Without the control of society, this whole system cannot work at first. And the problem is not even in the European salaries of officials: a system of hierarchical power that is not controlled by society cannot do anything else. Even in the USSR, such a system worked, albeit badly, but only because the entire management system was permeated by the party vertical. The official was responsible not only to his boss, but also to the party apparatus. Sometimes it helped, sometimes it didn’t. But it was still better than the current system. There is nothing to say about the comparison with Europe.
Experts of analytical centers are obliged to observe “polites”, so their assessment of the National Strategy is clearly too soft:
“The strategy of the Ministry of Finance tries to foresee modern European tools and practices, without having the main one – European rule of law, European quality of public administration, European low level of corruption in state bodies. In the absence of European inclusive quality institutions, the use of only European instruments will lead to an increase in corruption opportunities, pressure on the business of unreformed law enforcement and control bodies, and increased shadowing of the economy. Ukraine still needs a simple and fair tax system, the eradication of the practice of presumption of guilt in the tax and customs administration – which will create a comfortable environment for the rapid recovery of the economy without checks, corruption and interference.”
Leonid Shtekel
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