The Business Ombudsman Council provides recommendations to state bodies on the basis of individual cases and in accordance with published systemic reports. Here we have collected information on the implementation status of systemic recommendations only.
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Report name
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Issued recommendations
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Execution status
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Systemic report "Problems with administering business taxes in Ukraine" |
To ensure proper technical functioning and maintenance of the VAT electronic administration system. Manual control and unauthorized intrusion into the system, resulting, inter alia, in a questionable "losses" of VAT invoices, refusals to register VAT invoices due to "state 9", etc., shall be eliminated. Same approach shall be employed in relation to those instances, when the records in the VAT return and the VAT administration system do not reconcile. This can be achieved, inter alia, by introducing personal disciplinary, administrative and financial liability of the officials of the tax authorities. In addition, the Tax Code shall be amended to provide for financial liability of third-party entities providing technical maintenance and support of the electronic administration system (for instance, sanctions shall be imposed if the taxpayer is unable to register VAT returns due to inaccessibility of the system or its' failure).
State Tax Service of Ukraine |
In process
— comments:
Implementation of the Law No.1797 dated 21 December 2016 "On Amendments to the Tax Code of Ukraine to Improve the Investment Climate in Ukraine" is still in process of its' eventual implementation. It is aimed at simplifying tax administration and is an important part of the reform of the SFS. This is a joint work of the VR deputies, experts and business representatives dating back to the last year.
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To ensure that the local tax authorities are trained and prepared to effectively support the taxpayers with all kinds of issues arising in connection with the implementation of VAT electronic administration. Besides, the State Fiscal Service shall promptly collect information about typical problems arising in connection with the VAT electronic administration followed by the practice of issuing formal clarifications. State Tax Service of Ukraine |
In process
— comments:
This recommendation has been discussed many times during the meetings between the BOC and the SFS. Although, the SFS provides taxpayers with explanations of the most typical problems, the territorial tax authorities are usually not ready to effectively support taxpayers for all types of issues arising from the functioning of the electronic system of VAT administration.
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The Tax Code shall provide for an effective procedure of administrative appeal (please see Section "Administrative appeal" for details) whereby the supervising tax authorities will monitor compliance by the lower-level tax authorities with all VAT refund procedures.
State Tax Service of Ukraine |
In process
— comments:
On October 21, 2015, the Ministry of Finance has issued the Order No.916 "On approval of the procedure for registration and filing of complaints by taxpayers and their review by the controlling bodies".In particular, in accordance with the Order No.916, the review of the complaint materials in a closed meeting takes place with the participation of the authorized representative of the BOC; the BOC has the opportunity to file its own objections.However, the administrative appeal procedure needs further improvement.
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To amend the Tax Code to provide for personal disciplinary, administrative and financial liability of the officials of the tax authorities for unlawful delays with processing VAT refunds.
Ministry of Finance |
In process
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To ensure proper and effective control over regulatory practices employed by the local tax authorities, especially when they did not comply with the procedures, envisaged by the Procedure of Taxpayers' Record Keeping. Strict compliance therewith shall be ensured through personal liability of the officials of the tax authorities for malpractice.
State Tax Service of Ukraine |
In process
— comments:
Local control agencies are vested with servicing functions only; whereas the control is transferred to the MD SFS.The procedure for holding liable remains difficult to apply, enabling the officials to evade disciplinary liability.
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To apply and interpret tax laws and regulations with the due regard being given to common court practice shall be communicated by the State Fiscal Service of Ukraine to the tax authorities of all levels. The practice when, despite existence of similar cases (or even regarding the same taxpayer) the tax authorities continue embarking upon questionable argumentation which have been routinely assessed by courts in the taxpayer's favour, shall be eliminated.
State Tax Service of Ukraine |
In process
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The administrative appeal procedures available to the taxpayers willing to challenge the results of the tax audits shall be effective and time-efficient, rather than formalistic as it often appears to be (please see Section "Administrative appeal" for details). While appointing and performing the tax audit, the tax authorities shall strictly comply with the procedures prescribed by the law, and the supervising authorities shall ensure such compliance in an effective manner. The Tax Code shall be amended to specify particular sanctions to be imposed on the officials of the tax authorities for procedural and other violations during appointment and performance of the tax audit. Such sanctions shall be personalized and variable (from reprimand to dismissal and fine) depending on the degree of violation by the particular official.
Ministry of Finance |
In process
— comments:
Although this recommendation has been discussed repeatedly, the extent of its' practical implementation remains quite limited.
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Instances of abuse of power by the tax authorities in launching criminal proceeding based on the results of the tax audit or against the taxpayer's officials shall be eliminated. Prevention of fraud and malpractice in the course of launching and performing of tax criminal investigations could be guaranteed by "checks and balances" system and personalized liability of the tax authorities' officials. The BOC will address these issues in its systemic report for the forth quarter of 2015 on abuses of criminal procedural law by law-enforcement agencies. State Tax Service of Ukraine |
In process
— comments:
In 2016, the Methodological Recommendations were amended respectively. The number of criminal proceedings has generally decreased. Only in rare cases the criminal proceedings are initiated before the administrative appeal procedure completed.
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To forbid the tax authorities to initiate criminal proceedings against the taxpayer's officials based on the results of the tax audit until the taxpayer's tax obligation is duly acknowledged (i.e., until the administrative appeal and / or consideration in a court are finished). If the results of the tax audit are successfully challenged by the taxpayer in court, the criminal proceedings initiated merely based on results thereof, shall be immediately ceased. Ministry of Finance |
In process
— comments:
Article 56.22. of the Tax Code of Ukraine provides as follows: "If a taxpayer challenges a decision of a control authority to the court or through the appropriate administrative procedure, such taxpayer cannot be accused of tax evasion exclusively on the ground of such decision of the control authority until the proceedings have been ultimately settled by the court or through the appropriate administrative procedure."
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To reflect in the Tax Code and enforce in practice the approach evidenced by a widespread judicial practice, whereby minor mistakes or deficiencies in primary documents cannot be used as a ground for charging additional tax liabilities, penalties and fines on the taxpayer. Ministry of Finance |
In process
— comments:
The Supreme Court in its decisions specifies that the facts of the occurrence of errors in executed primary documents or the absence of individual ones, shall not, as such, constitute the ground for the conclusions on the absence of the actual business transaction, - provided that the other data or evidence prove otherwise. The implementation of this recommendation requires preparation of a special explanation of the SFS with concrete examples of such errors.
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To implement a systemic risk-based approach to conducting unscheduled tax audits. Such approach shall ensure comprehensive evaluation of the particular taxpayer and the necessity of subjecting its activities to unscheduled tax audit to the contrary of the current approach whereby the tax authorities are empowered to launch unscheduled tax audit even if a single (and often casual) criterion pops out.
State Tax Service of Ukraine |
In process
— comments:
Pursuant to Article 78 of the Tax Code of Ukraine the unscheduled documentary tax audit shall be appointed if at least one of the grounds specified in the article is applicable.There is a positive dynamics, however, – the number of unscheduled tax audits somewhat reduced. At the same time, it appears that the risk-oriented system is virtually never employed in practice.At present, the issue of including the taxpayers to the plan of audits became rather significant. According to the Tax Code, the plan shall be issued for the entire year. However, since February 2018, the SFS began to make massive changes to the plan of audits in violation of direct provision of the Tax Code.
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To disclose to the general public statistics on the administrative appeal procedure on a regular basis (for instance, on a quarterly basis). Such information shall include, inter alia, information regarding the total number of complaints, the results (positive and negative) of administrative consideration of complaints at each appeal level, etc.
State Tax Service of Ukraine |
In process
— comments:
The statistics is disclosed to public on the SFS web-site, but its form and information content shall be improved.
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To amend the Tax Code to foresee personal administrative and financial liability of the officials of the tax authorities for instances of malpractice and nonprofessional behaviour. Ministry of Finance |
In process
— comments:
The respective amendments to the legislation are being approved by the Ministry of Finance together with the relevant regulatory authorities.
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To ensure that the principle of interpreting ambiguous provisions of the Tax Code in favour of the taxpayer shall be consistently complied with by the tax authorities at all levels. An effective "checks and balances" system and introduction of personalized liability for the malpractice committed by the officials of the tax authorities shall be used as tools to achieve this.
State Tax Service of Ukraine |
In process
— comments:
The BOC and the SFS discussed this recommendation during the number of meetings. However, its’ practical application is still very limited. Both the SFS and the local tax authorities apply, as a rule, fiscal approach to the interpretation of the provisions of the Tax Code.Therefore, in practice this principle almost never applies. The exception is the established position of the Supreme Court or the official position of the Ministry of Finance.
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To forbid the tax authorities to found their conclusions (formalized in the act of the tax audit) on internal biased information, which is not available to the taxpayer and the public. Further, the tax authorities cannot be motivated by informal internal instructions regarding the fines and penalties to be collected from the taxpayers.
State Tax Service of Ukraine |
In process
— comments:
The BOC and the SFS discussed this recommendation during the number of meetings. However, its' practical application is still very limited.
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The decisions of the tax authorities to appeal in the court of law shall be subject to "second-eye review" (for instance, by the supervising tax authority) from the perspective of expediency and legal feasibility. Such approach appears to be timely given the recent changes in the procedural law whereby the court fee relief enjoyed earlier by the tax authorities was further discontinued.
State Tax Service of Ukraine |
In process
— comments:
The BOC and the SFS discussed this recommendation during the number of meetings. However, its' practical application is still very limited due to a large number of current disputes (around 100,000). At the same time since the 2016, all appeals to the Supreme Court are subject to the SFS's prior approval.
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To ensure proper technical functioning and maintenance of the VAT electronic administration system. Manual control and unauthorized intrusion into the system, resulting, inter alia, in a questionable "losses" of VAT invoices, refusals to register VAT invoices due to "state 9", etc., shall be eliminated. Same approach shall be employed in relation to those instances, when the records in the VAT return and the VAT administration system do not reconcile. This can be achieved, inter alia, by introducing personal disciplinary, administrative and financial liability of the officials of the tax authorities. In addition, the Tax Code shall be amended to provide for financial liability of third-party entities providing technical maintenance and support of the electronic administration system (for instance, sanctions shall be imposed if the taxpayer is unable to register VAT returns due to inaccessibility of the system or its' failure). 