The Business Ombudsman Roman Waschuk presented the results of an investigation on his own initiative into numerous cases of tax invoices suspension.
The event was attended by leading business associations representatives, including the American Chamber of Commerce, the European Business Association, the Ukrainian League of Industrialists and Entrepreneurs, the Chamber of Commerce and the Federation of Employers of Ukraine.
As part of its own investigation, BOC not only analyzed the origins of the problem, particularly changes to the Cabinet of Ministers Resolution No. 1165, which provoked an avalanche of suspended invoices. The Council arrived to the conclusion that the unpredictable regulation and fiscal bodies’ decisions unreasonableness increase the gap in the relations between the state and business.
“We encourage state bodies to abandon attempts to manage automated processes manually. Predictability, risk orientation, business orientation, proportionality, digitization and communication are principles that we have identified as fundamental for further functioning of the VAT system to create favorable conditions for honest business,” said Roman Waschuk, the Business Ombudsman.
“The BOC report confirms the fact that, unfortunately, the fiscal pressure on business is large-scale. Over 40% of active VAT payers were blocked at the end of 2022. I really hope that the unfair pressure of the tax authority will be ceased. Because a transparent business operating in the country – paying taxes, paying officially declared salaries to employees, supporting the army, deserves having at least basic working conditions and decent service from state bodies,” added Anna Derevyanko, Executive Director of the European Business Association.
Business associations upheld conclusions of the BOC’s own investigation. “SMKOR present-day system is a challenge to legal democratic state principles, a challenge to a country exhausted by war, because it applies an inadequately harsh punishment and has unreasonably severe tax consequences based solely on suspicions and doubts of tax authorities about the reality of the taxpayer without proving any fact that would justify such suspicions and doubts ” , – stressed Yuliya Drogovoz , Vice-President of the Ukrainian League of Entrepreneurs and Industrialists.
Serhii Salivon, an Expert of the Analytical Center for Economic and Legal Research and Expert Work of the Federation of Employers of Ukraine, added: “The FEU came to the same conclusions after communicating with its members. The changes to the SMKOR, which effectively removed the list of risky commodity items from the control procedure, hit the producers the hardest. The investigation of the BOC is a serious systematization of problems and an evidence base of destructive actions by fiscal authorities in relation to entrepreneurs, particularly during the war.”
In the report, BOC provided the state with recommendations on establishing a mechanism for the VAT system automated operation and preventing human intervention in tax administration processes.
“We are grateful to the Business Ombudsman Council for the hard work done and for initiating the discussion of the business-important topic of tax invoices suspension and adjustment calculations to them. We are ready to join the work, share expertise and proposals with the aim of developing the most effective practical mechanisms to facilitate doing business,” summed up Oksana Shvets, Head of the “Taxation” and “Customs Policy” areas of the American Chamber of Commerce in Ukraine.
Read the full text of the report here.
Annex 1 (Technical recommendations).