The joint work of think tanks, business and government resulted in the de-shadowing of the economy
“According to the calculations of the volume of shadow schemes in the dynamics by years, we see positive results in most schemes,” said Oleh Hetman, coordinator of expert groups of the Economic Expert Platform, during the conference ‘De-shadowing of retail trade: new challenges’ organized by the Ukrainian Business Council.
“If we look at the dynamics from 2020 to 2023, four of the seven largest schemes have decreased. Offshore schemes have decreased radically – from UAH 30-35 billion to UAH 10 billion. The “twist” schemes also decreased from UAH 25-30 billion to UAH 10-15 billion. Agrarian schemes have decreased to a few billion. Excisable goods are not so radical, but the volume of schemes is also decreasing. That is why we would like to thank the chairman and members of the Tax Committee of the Verkhovna Rada, the Tax Service, and the National Police for their important work,” Oleh Hetman said, according to the Financial Club.
Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, said: “There are achievements in the work of the State Tax Service. We see them in numbers, but obviously they are not enough. Entire industries are still in the shadows, they are fighting for their shadow, they do not want to come out of the shadows. Unfortunately, there is still more to come than the achievements reflected in these figures,” the MP is convinced.
To fight the shadow in the markets of excisable goods, electronics and Internet services, the Economic Expert Platform experts have prepared a plan with eight main recommendations.
The first recommendation is to monitor the implementation of the Law No. 3840-IX “On Rebooting the Bureau of Economic Security of Ukraine” and to reboot the Customs as soon as possible. The second is to reboot the State Tax Service with the help of draft law No. 9243. The third is to define clear performance indicators (KPIs) for the State Tax Service, the State Migration Service, and the BES and to enshrine them in law.
“The State Tax Service should take a more rigorous approach to tax evaders. But there should also be clear KPIs for the work of the State Tax Service,” said Myroslav Laba, an expert at the Economic Expert Platform. “The Verkhovna Rada and the State Tax Service have defined the criteria for taxpayers’ good faith. In our opinion, there should also be criteria for the State Tax Service that would assess the effectiveness of its work not by the fact of fulfilling the revenue plan, but by tax gaps, when we would see in dynamics how much remained outside the budget, how many taxes remained uncollected.”
The fourth recommendation is to introduce an analytical system for the cash registers and a risk-oriented approach to planning audits.
It is also important to ensure the publicity of data on the volume of legal sales and services provided for the most vulnerable groups of goods and services. “Today, on the Tax Service’s website, we see only total revenues through cash registers, with the total amount for tobacco products, fuel, and alcohol products. If these revenues were also available for retail chains, jewelry, medicines, and for individual categories – gasoline, diesel fuel, gas, that is, with more detail – it would give specialists more opportunities for analytics and publicity, and, accordingly, faster and more effective response of all services, not just the tax service,” believes Myroslav Laba.
The sixth recommendation is to introduce economic incentives for buyers of excisable goods to receive a fiscal check (fiscal check lotteries and other financial mechanisms to stimulate buyers).
Another recommendation is to increase pressure on the shadow economy by increasing fines for illegal trade in excisable goods, creating a library of reference samples of finished tobacco products, and punishing those guilty of tax evasion.
“Today we often see that a fine of UAH 3-4 thousand does not stop shadow trade, and there should be more responsibility, because the losses from the shadow market are quite significant. Last year, about UAH 2 billion was added to the excise market, while the total losses from gray schemes amounted to UAH 24 billion. Thus, the tax authorities penalized the shadow market by 10% of the amount they withdrew from taxation,” the expert states.
The last but not least recommendation is the systematic work of the TSC on economic security and the Parliamentary Tax Committee to strengthen control over the work of law enforcement and regulatory authorities in terms of the circulation of excisable goods and other risky groups of goods.
“In fact, the only center that currently coordinates and influences the reduction of the shadow market is the Verkhovna Rada Committee and the TSC. It was surprising for us that the Cabinet of Ministers liquidated the interagency working group that was engaged in de-shadowing in March this year,” said Laba.
Yevhen Sokur, Deputy Head of the State Tax Service, said that they will consider publishing more aggregated industry data for market analysts to analyze.
Ivan Pysarchuk, Deputy Head of the Department – Head of the 2nd Division of the Strategic Investigations Department of the National Police, reported on the work of the National Police in combating black schemes, cited a number of practical cases and supported the idea of increasing the responsibility of shadow business. “The higher the sanction of the article, the less people will be involved in it,” he said.
