Transparency in question: what’s wrong with the ‘white list’ of the Ukrainian tax service (continuation)

IA “FACT” already wrote that there is a “white business club” in Ukraine. This is an initiative of the State Tax Inspectorate, which currently unites 8,199 companies and non-profit organizations that pay taxes honestly, have a salary higher than the average in the industry, are not in the stage of liquidation and do not appear on the risk lists. They are assigned compliance managers, promised fewer inspections and the possibility of booking employees.

However, after the scandal involving firms linked to sanctioned or corrupt persons, the initiative was criticized for non-transparent rules, lack of an appeal mechanism and the possibility of “invisibility” of companies.

It becomes obvious that without clear procedures, external audit and public control, the “white” status risks turning into an element of demonstrative loyalty instead of a real instrument of trust. Business associations are calling for reforms, but the state is limited to reacting to scandals.

White list of the Tax Office: when transparency becomes invisible

When the tax calls calling someone “white”, one would like to believe that it is about transparency, decency and clean tax hands. But as soon as you start to understand how the “White Business Club” works, you start asking questions. Because if white is about trust, then who should we trust? DPS, which itself determines the criteria and single-handedly excludes? Or companies that we can’t even see in the full list?

Because, as it turned out, some companies can give up from the publication, simply by submitting the relevant application through the electronic cabinet.  You get into the “club”, you get preferences, but no one sees that you are there. And if you’re a big business with political connections, isn’t that convenient?

When journalists recently discovered on the “white list” companies associated with sanctioned persons and those involved in high-profile cases, journalists inquired: who filters and how? The answer turned out to be in the style of “everything is fine, trust us.” But the business did not believe – and the EBA has already called for a review of the criteria and the introduction of an external audit.

Because now everything rests on a system in which there is no appeal mechanism, no justification for exclusions, and no public control. The tax office can exclude a company, for example, for ties to an aggressor country, but it is not obliged to publicly explain. As a result, everything looks like a “black box”: you enter – it is not clear how, you are excluded – it is also not clear why.

As long as the “white list” is held on trust, any erroneous inclusion or exclusion, especially politically engaged, destroys the very idea. Because as soon as the “on call” company gets there, the other participants automatically look just as tainted.

And then it doesn’t matter that they really pay taxes, work properly and support the budget in the darkest times. Because, as one hero said, “injustice to one is a threat to all.”

“White business” under the microscope: what does the business itself think about the DPS initiative

The authorities say: “We have created a list of the best.” Quite a legitimate question from the side of entrepreneurs: “And who determined what exactly is better?” The initiative of the “White Business Club” looked like an attempt to change the tone of the conversation between entrepreneurs and the tax office. But for now DPS reports of the thousands of bona fide companies on the list, the business community is more likely to see it as an unwritten project with a pretty cover.

Back in December 2023, the European Business Association welcomed the launch of the idea as a signal for a healthy business environment. But within a few weeks, careful but clear “buts” appeared in her public positions.

Problem No. 1 — inclusion criteria. Businesses want clear and stable rules: what data is being analyzed? Why does one company get listed and another not, even with similar tax rates? “Formalism without transparency does not work,” EBA participants said a year ago. DTKT, a professional online publication dedicated to accounting, taxation, law, finance and auditing, confirmed, that the mechanism remains closed for third-party analysis.

Problem #2 — lack of feedback. How should a delisted company act? Who explains the reasons? Can I appeal? There is no clear regulation yet. Business is in limbo: either you’re comfortable and stay on the list, or something’s wrong and you’re off the board. No explanations.

Problem No. 3 is the effect of “public relations instead of reform”. “Club” is called a communication tool, not a structural change. Business wants real tax guarantees, protection from pressure, simplification of procedures — and in return receives status and compliance manager. Nice, but not systematic.

Business wants clear and open rules: it is clear by what criteria a company is included in the list, who decides it and why. So that there is no impression that they get there “on call”. Publicity is required: an explanation of why exactly they were included or excluded, the possibility of filing an appeal. And also — independent supervision, for example, by the EBA, SUP or the American Chamber of Commerce. And the main thing is that the “white status” gives real bonuses: state guarantees, loans, preference in state procurement.

Are there “white lists” in the world? How the US, Europe and Asia are promoting good business

While Ukraine only builds up the concept of “white business” with compliance managers and a moratorium on audits, the world has long had its own ways of encouraging tax decency. But in most countries these are not separate “clubs”, but a structural part of the system of incentives, ratings and regulations, which have public control and direct benefits.

In the EU, there is a “good taxpayer rating” system, where companies receive a “green light” in the form of automatic priority in electronic VAT crediting, a reduction in the frequency of tax audits, and, most importantly, participation in simplified customs procedures through the system AEO (Authorized Economic Operator).

Yes, in Germany, the fiscal services publish instructions for a “positive tax profile” and directly indicate, that such companies receive less supervision and have advantages in state financing.

There is no centralized “white list” in the USA, but the rating of responsible business is formed by several agencies at once – from IRS (tax) to the SEC (stock exchange regulator) and private platforms (in particular Glassdoor and BBB). Companies that submit reports on time, do not have fines and undergo independent audits, quite naturally receive higher trust ratings, which directly affects the cost of loans, access to government contracts and the speed of obtaining permits.

South Korea 10 years ago introduced Taxpayer Grading System, which evaluates companies according to dozens of parameters: reporting, debt and participation in subsidies. Companies with the highest rating receive tax curators, have a simplified inspection regime and are the first to join state subsidy programs. This is, in fact, an analogue of our compliance manager, but in a system where the rating is officially published and can be appealed.

In the Ukrainian “Club of white business” companies too receive a moratorium on checks, a personal manager and the possibility of booking up to 25% of employees. But the difference is in the absence of permanent external audit, public rating points and the right to appeal.

The world has long understood that white business is not about PR, but about fair rules of the game, equal access and verifiable trust. And if Ukraine really wants to play by the rules of the global market, the “white list” should turn into a system, and not remain a promotional gesture of goodwill.

How does this system affect the economy?

Companies that previously avoided legal registration or hid their turnover, now are interested in “white status”, because it means peace. Entrepreneurs believe: if it works, it is worth going “into the light”.

Has there been less shadow? Here is a pause. Because no official reports on the reduction of the share of the shadow economy among the participants of the “white list” have been made public. The Tax Office does not provide comparative dynamics: how many companies began to declare more? What is the increase in VAT for “whites” compared to the rest?

So for now, changes in culture can only be judged indirectly – by the decrease in complaints, the increase in the number of people willing to apply to the club, by the increase in the share of small businesses among participants (in particular, the number of FOP increased by more than 500).

Yes, the initiative works — as a signal, as a pilot, as a step towards a civilized partnership between the state and business. But without open statistics, external audit and feedback, it remains a system of expectations, not confirmations.

…”White business” is not about benefits, but about making honesty no longer dangerous. And that in the future there will be not 8 thousand such companies, but 80. But only if trust is mutual and verified by facts.

Tetyana Viktorova