PRESIDENT OF UNGO “TAXPAYERS ASSOCIATION OF UKRAINE” GRIGOL KATAMADZE MODERATED THE REGIONAL ROUND TABLE ON «KEY BUSINESS PROBLEMS IN TAXATION PROBLEMS»
On February 17 of this year, the Regional Round Table «Key problems of business in taxation» was held in the western region of Ukraine, in the city of Lviv.
The round table was moderated by the President of the UNGO “Taxpayers Association of Ukraine”, Vice-President of the Taxpayers Association of Europe, member of the Supervisory Board of the UBC (Ukrainian Business Council) Grigol Katamadze.
The event was held simultaneously in an offline and online format with the support of the Center for International Private Entreprise (CIPE).
the organizers of the event were the Lviv Chamber of Commerce and Industry of Ukraine (LCCI) and the Women’s Business Chamber of Ukraine (WBCU) —
The purpose of the conference: discussion of key business issues in taxation.
— Nataliya Karpenchuk-Konopatska, President of the WBCU and head of the Project;
- Andriy Flys, acting Head of the STSU Headquarters (State Tax Service of Ukraine) department in the Lviv region;
- Svitlana Kamentseva, the Head of the Department of Rent Payments and Environmental Tax of the STSU Headquarters in the Lviv Region;
- Stepan Kuybida, Director of the Investment Department of the Lviv Regional Military-Civil Administration;
- Dmytro Aftanas, president of the Lviv Chamber of Commerce and Industry;
Liliya Dolinska — Head of the Council of the TB (Territorial Branch) of the UNGO “Taxpayers Association of Ukraine” in Lviv region
and about 40 representatives of the business environment of the western region of Ukraine.
During the round table, problematic issues were discussed, which are currently complicating the operation of business.
The event was opened by the President of the WBCU and the head of the Project — Nataliya Karpenchuk-Konopatska, who congratulated all those present with the beginning of the Round Table, introduced the speakers of the event and invited the President of the Lviv Chamber of Commerce and Industry Dmytro Aftanas to speak.
Dmytro Aftanas invited the representatives of the government, regulatory bodies and business, who are present at the event, to discuss in the format of an open dialogue the problems and challenges facing taxpayers in the conditions of martial law and to jointly find ways to solve them. He noted that the Lviv Chamber of Commerce and Industry is an open platform for professional discussions and dialogue with business. In particular, the President of the LCCI noted: «Everything has its limits, the war. Business has many problems, the Lviv Chamber of Commerce and Industry currently receives a lot of appeals related to issues of force majeure, which is also a topic for discussion, in particular in terms of interaction with the tax service.» Dmytro Aftanas also offered to exchange opinions on such important issues as tax reforms, their impact on business operations, ways to create favorable conditions for both business and investments, which are extremely necessary for rebuilding the country’s economy in the post-war period.
The President of UNGO “Taxpayers Association of Ukraine” — Grigol Katamadze, as the Moderator of the event, in his welcome speech thanked for the organization of the event at the proper level and congratulated the participants of the Round Table who took part in it.
The President of the Association noted: «the Taxpayers Association of Ukraine is a member of the European Business Association and is almost in opposition to the authorities. Talking with my colleagues from Europe, I see how they have built effective relations of business with the authorities. Right now we have a unique opportunity, regardless of the war, to build a unique relationship between tax payers and the government,» Grigol Katamadze emphasized.
Next, the President of the Association drew attention to such important things as the adoption of the new Tax Code of Ukraine, which is the second Constitution of Ukraine, which must be adapted to the existing business environment, and it’s not the business that should adapt to the Code and to the implementation of zero declaration, which, in his opinion, will not provide significant revenues to the budget.
For more than one year in a row, UNGO “Taxpayers Association of Ukraine” emphasizes the adoption of the main and the most important points, namely:
- reduction of the tax burden on the wage fund, by combining the USC (Unified Social Contribution), personal income tax and military tax at a rate of 30%, and during the next three years reducing it to the level of 20%;
- moratorium on changes to the Tax Code of Ukraine;
- the introduction of a tax on withdrawn capital, which foresees a further increase in GDP by 1.5%, despite the drop in revenues in the first two years after its introduction;
- attraction of foreign investments, despite the fact that today we have only 5 (five) investment applications.
Grigol Katamadze raised the issue of encouraging investors from the state, as this issue is important for the problem of the country’s recovery after the war. The President of the Association emphasized: «the Law of Ukraine «On State Support of Investment Projects with Significant Investments in Ukraine», the so-called Law «On Investnannies» was signed by the President of Ukraine.
The President of the Association gave an example of post-war investments in Georgia, where the amount of investments in the first months, from September to December 2008, amounted to 4 billion US dollars.
The next example of investment problems, which was cited by Grigol Katamadze, was an example from social networks of the situation regarding the Bayraktar (drones) manufacturing plant, when the President of Ukraine during his visit to Turkey, visited the plant for the production of Bayraktars. After that, the idea of creating such a plant in Ukraine was considered, which in the future envisaged an investment of 100 million euros.
«Volodymyr Zelensky, as the President of the country, has done his job. But, unfortunately, the problem was the connecting to the power grid, it was estimated at 10 million euros. Such examples indicate that the legal norm regarding the construction, reconstruction, capital repair of adjacent infrastructure facilities, in particular, connections to energy networks, necessary for the implementation of important projects, is currently not working properly. Therefore, it is necessary to finalize the provisions of the Law regarding the elimination of such problems. I am sure that the state can pay these 10 million euros — that’s only 10% of the amount of investment that Ukraine will receive,» Grigol Katamadze noted.
The President of the Association did not ignore the issue of public procurement and the issue of public control over compliance of its legislation in the field of public procurement.
After that, Grigol Katamadze mentioned the «10-10-10» reform, in particular, he noted: «I am not an admirer and do not support the reduction of tax rates at the moment, I think it is clear why? The country’s budget needs to be filled during the war,» the Moderator noted. «At the moment it is too early to talk about it, since these are only plans today, I will give the following statistics: as of January 1, 2020, the amount of unpaid income tax amounted to 1 trillion 200 billion hryvnias. This, in turn, means that it is unpaid not because it was simply not paid in violation of the law, but because today taxpayers have real opportunities to optimize tax payment due to the current legislation. Back in 2018, the Minister of Finance of Estonia said that we, in Ukraine, have a beautiful word «optimization», although non-payment of tax and tax evasion should be called «minimization», — emphasized the President of the Association.
Subsequently, Grigol Katamadze addressed all present (at the meeting) representatives of the executive authorities and regulatory bodies, noting that there is currently a «window» of opportunities, therefore he urges all of them to switch to close cooperation with business and develop ways of dialogue, because everyone is doing a single, common cause, namely bringing order to the country, bringing it out of the state in which it is now. He cited the statistics of the Polish Economic Institute, which show that 45% of newly created businesses in Poland during the months of the war in Ukraine belong to Ukrainian citizens and only 4% are going to return after the Victory. «This is trouble. Therefore, we must work together and create conditions for the Ukrainian businesses and their representatives to return home,» the President of the Association emphasized.
Subsequently, the President of the Association, Grigol Katamadze, transitioned to the issue of digitalization in Ukraine, in particular in the tax system, and drew attention to the importance of providing such a digital product, relatively, to the newly created analytical body of the Bureau of Economic Security of Ukraine.
During the Regional Round Table, the Moderator made relevant comments to the participants’ speeches and summarized their speeches. In particular, Grigol Katamadze noted: «it is the Moderator‘s privilege to add something to the speeches of the participants of the event. I completely agree (with the statement) on the culture of paying taxes. But, I always ask everyone not to compare today’s Poland and today’s Ukraine. Should we compare the state of the Ukrainian economy today with the state of the Polish economy 30 years later, not with what they were doing when they started (their way)? What did the Slovaks do? By the way, Slovakia is a small country that has made such conditions that today all the world’s automotive brands are represented in Slovakia. And the number one country per capita (this was 2 years ago) is Slovakia for car production. Yes, I understand that this is an assembly of cars, not a full cycle of their production, but for a small country this is very important. At one time, we invited prominent experts Mr. Baltserovych and Mr. Miklos towards strategic directions in the Ukrainian Government, why don’t we listen to them, to their advice, what exactly were they doing in their countries? All successful countries do this today,» concluded the UNGO “Taxpayers Association of Ukraine” President Grigol Katamadze.
Grigol Katamadze focused the participants’ attention on the problem of blocking tax invoices, in particular, he noted: «for the last two months, two problems have been discussed at all events — non-reimbursement of business VAT and blocking of tax invoices. Blocking is simply a problem that did not start yesterday or today, it started immediately with the introduction of an automated system for monitoring the compliance of the tax invoice/adjustment calculation with the criteria for assessing the degree of risks — SMCAR (an automated system for monitoring compliance of the tax invoice/adjustment calculation with the criteria for assessing the degree of risk). I remember very well the conversation with Oleksandr Danyliuk, the Minister of Finance of Ukraine at that time, in 2018, when 500 taxpayers — members of the Association approached us, the Association, with the problem of blocking tax invoices. Then the former Minister said that this is not true, that it is only 0.001%. I then replied to him that if even 10 tax invoices are blocked by SMCAR, that means
something is wrong with this Procedure, approved by the Resolution of the CMU (Cabinet of Ministers of Ukraine). Then something was fixed, and lately it’s just trouble. Yes, after our interventions, providing many suggestions and comments together with business, from January 11 of this year, changes were finally made to the Order, unfortunately not all suggestions were taken into account, this problem remains, but I am sure that it will be solved and finally it will be fixed after full digitization of the tax service.
There should be an open dialogue between the tax service and the business. Because «white business», taxpayers of the real sector of the economy, understand well that the future of the country depends on them.
Andriy Flys, acting Head, was invited to speak next. The head of the STSU headquarters in Lviv Region, who addressed the participants of the Round Table and drew attention to the fact that all those who want to pay taxes do not have any particular objections to the process of tax administration and the current taxation system. He also cited the example of a neighboring and friendly country, Poland, where the burden on the wage fund is about 38%. Andriy Flys also gave examples of Poland’s VAT rate, which is 7-14%.
The following statistics, which were given by acting head of the STSU headquarters in the Lviv region, became the sums of the Lviv region’s budget revenues, namely:
- in total to the state budget in 2021: UAH 17.5 billion, in 2022: UAH 23.8 billion;
- in total to the local budget in 2021: 19.6 billion hryvnias, in 2022: 28.1 billion hryvnias.
That is, revenues increased by 6 billion hryvnias. (plus 36%) to the state and by 8 billion hryvnias. (plus 43%) to local budgets.
He also cited indicators of other budget revenues:
- VAT for 2021: UAH 7,422.0 million, in 2022: UAH 7,926.4 million;
- income tax revenue for 2021: UAH 2,303.0 million,
- for 2022: UAH 2,602 million;
- revenue of personal income tax for 2021: UAH 3,485.1 million, for 2022: UAH 5,428.7 million.
Acting head of the STSU Department in the Lviv region emphasized that in the region, tax payers were reimbursed all the VAT amounts they declared, including September 2022, despite the war.
Next, Andrii Flys briefly commented on the latest changes to the legislation, which provide for the reduction of inspection periods, the reduction of the reimbursement period to seven days, which is not realistic, and the introduction of electronic audit.
At the end of his speech, Andrii Flys called on all taxpayers to demonstrate their tax culture as much as possible and to pay taxes to the budgets on time.
Svitlana Kamentseva, the head of the department for the administration of rent payments and environmental tax of the State Department in the Lviv region headquarters, was invited to speak next, she cited the statistical indicators of environmental tax revenues in the region, as well as named the problems that exist in the administration of the tax, of increasing of its revenues, and also brought for discussion possible ways to solving the situation.
Among the business representatives present at the event, Myron Kuzemskyi, director of Trembita Musical Instrument Factory LLP, took an active part in the discussion, he made an excursion into history, stating that during the previous years was not built a tax system that would benefit the state and promote development business. The turnover tax of 2%, introduced during the war, only destroyed relations between businesses, and its cancellation drove part of the business «underground». Enterprises that are now trying to work sell their products, even military orders, with delayed payment, after which they do not have the funds to pay VAT on time, for which fines are charged. «We should not rebuild the country, but build a new one based on an economic model. Ukraine, from an export country even before the war, has become an import-orientation country, investors will not come to such a country and their production will be destroyed,» he said.
Liliya Dolinska, Chairwoman of the Council of Territorial Branch of the UNGO “Taxpayers Association of Ukraine” in Lviv region, focused the attention of those who were present on the problem of blocking tax invoices and noted that from November 2022, consultation meetings and online meetings of the Chairman of the VRU (Verkhovna Rada of Ukraine) Committee on Finance, Tax and Customs Policy Danylo Hetmantsev will be held on a regular basis every month with business, auditors and experts from all regions of Ukraine, where current problems are considered, ways to solve them and proposals for improving the operation of the SMCAR system are worked out. She noted that everyone who cares should be involved in the work of these meetings with professional meaningful proposals.
In the course of the Round Table discussion, participants named their problems, suggestions, and comments on issues of interaction between business, control, law enforcement agencies, and authorities.
In response to the participant of the event that the authorities need to communicate more with the business community, Grigol Katamadze gave an example of such interaction: «Chairman of the «Sluha Narodu(Servant of the People)» party, Olena Shulyak, at the first Conference «Recovery of Ukraine — Open Data and Stimulation of Investments» in January of this year promised that such meetings would take place once a month, and to her credit, she clearly adheres to her public promises,» Moderator Grigol Katamadze noted.
Grigol Katamadze reminded the participants of the event when operations related to the import of cars were exempted from customs duties and VAT, and how the people, taking advantage of this opportunity, began to import such cars as Bentley. «Therefore, if we, adopting the Act on the Independence of Ukraine, had immediately made a decision to ban former party officials from holding positions in government bodies for the next 15 years, this phenomenon would not have happened. But unfortunately, independent Ukraine was built by people from «yesterday’s» cabinets, and Ukraine could not have been built in any other way. Therefore, right now, the war gives us a unique opportunity to build a new state with European values,» the Moderator of the event emphasized.
Addressing the representatives of the business community who were present at the event, the President of the UNGO “Taxpayers Association of Ukraine” emphasized: «It would be very good if business representatives from your region, when UNGO “Taxpayers Association of Ukraine” holds large-scale forums in Kyiv, would join such events attended by representatives of the authorities , where businesses can bring their problems to them. We have already had three such meetings, and after each one a draft law is born,» Grigol Katamadze noted.
One of the participants of the event, addressing the Moderator, commented on his speech regarding the creation of the Bureau of Economic Security and the formation of its personnel potential: «I really liked your analogy of holding a competition for positions in the Bureau of Economic Security with the formation of the composition of the VRU in 1991, at a time when there were no alternatives and «new» faces».
Moderator Grigol Katamadze responded to this remark: «You know my position regarding the exams for representatives of the economic security special services. There must be high-quality and transparent conditions of the competition. «Passed (a law) — work!». «To conclude this issue, I would like to note that nothing can work effectively if the state creates something new, then does not finance it and thereby gives the «green light» to employees to commit illegal actions,» Grigol Katamadze emphasized.
After listening to the problem with the tax, which was voiced from the hall by the participant of the event, the Moderator answered her: «I don’t know Mr. Andrii very well, but I am sure that from what I heard, the person wants to do something best. I am sure that the next time you will meet together and take advantage of the existing opportunities to resolve your issue.» At the same time, the Moderator addressed the acting Andriy Flys, head of the STSU Department in the Lviv region: «I want to address you with a request, not as a taxman, but more as a human being. Just to treat this situation with greater understanding, although the state of war continues in the country today, we live in slightly different conditions than in March, April or May last year,» Grigol Katamadze noted.
During the event, Grigol Katamadze spoke about the following issue: «On the ground, we are now raising these issues at meetings with people’s deputies. In fact, the President of Ukraine now has more important issues to resolve, he created the National Council for the Recovery of Ukraine from the Consequences of the War and appointed the Head of the Office of the President Mr. Yermak and Mr. Prime Minister of Ukraine Denys Shmygal, as the the Secretary of this Council the Chairman of the VRU Committee on Finance, tax and customs policy he appointed Mr. Danylo Hetmantsev, as well as he invited representatives of government structures, experts, associations, a total of at least 300 people and worked out the Recovery Plan of Ukraine within several months. At the end of September last year, this Plan was finally developed. Today, it is already February 2023, this Plan has not yet been approved by the Cabinet of Ministers of Ukraine. At a meeting with people’s deputies, I heard the following: «Now the matter remains with the executive power. We have finished our part of the work.» I asked them: «Didn’t you approve the executive power for their positions after you were elected by the people? Solve this issue as soon as possible and activate them.» As a result, two days later, the Chairman of the VRU Committee on Economic Development, Dmytro Natalukha, promised at a meeting to resolve this issue already in the first days of March this year,» Grigol Katamadze replied to the participant of the event.
One of the urgent and painful problems of today is raiding, said Bohdan Shevtsiv, head of “VEEM METALAVTOPROM” LLC. In particular, he noted that the dialogue between business and government representatives has been lost, because, in his opinion, most of the power structures are engaged in control and supervision, and business assistance from the state authorities is considered as self-interest and corruption. Unfortunately, the raider seizures did not stop, not meeting resistance from the authorities. And entrepreneurs in this situation are left to their own devices, the only advice from those in power is to go to court. Confirming his words, Bohdan Shevtsiv cited the example of 8 companies that suffer from raiders, and lawsuits have been going on since 2017. Consideration of cases is delayed. That is, the funds of entrepreneurs, which must be directed to development, go to lawyers and various examinations. This state of affairs is unacceptable and requires immediate attention from the authorities.
Moderator of the event, the President of UNGO “Taxpayers Association of Ukraine” Grigol Katamadze, addressing the representatives of the tax service, in particular, noted: «I want to return to two questions that were named to tax officials. I would say that they are technical in the format of their solution, compared to what raids were conducted by the tax office throughout the country in 2016-2018, with the motto «stop the mask show». And after the searches the day before yesterday, someone is also talking about making a decision to «stop “the mask show”.» After that, I invited my colleagues from the tax service and asked for representatives of the tax police to come as well, and told them the following: «Creating a business is very difficult. It is not one day and not one month. «It takes no more than 5 minutes to put your face on the ground, and it will take much longer to raise this business,» said the UNGO “Taxpayers Association of Ukraine» President Grigol Katamadze.
«More about searches in IT companies. Everyone understood that there would be an outcry. No, they were held and it was necessary for the Vice-Prime Minister — Minister of Digital Transformation Mykhailo Fedorov to personally apologize afterwards, I think this is already too much,» the Moderator emphasized.
In conclusion, I will say one thing: «Think, this business pays taxes, at the expense of which you receive a salary. We are all Ukrainians and we can treat each other more humanely,» said the President of the UNGO “Taxpayers Association of Ukraine” Grigol Katamadze.
The meeting of the Regional Round Table took place constructively, in the format of a dialogue. The participants of the event had the opportunity to exchange their opinions on solving and avoiding complications in key issues of taxation and interaction with executive authorities.