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An analysis of the implementation of electronic administration of value added tax (VAT), which was conducted by experts of the Anti-Crisis Council of NGOs, has revealed a serious drawback – the system has caused and continues to cause the depletion of working capital, which is leading to the closure of businesses amid the economic crisis. It is also the cause behind investors leaving Ukraine, capital outflow, and the escape of companies to neighboring countries, head of the Anti-Crisis Council of NGOs of Ukraine and President of the Ukrainian League of Industrialists and Entrepreneurs (ULIE) Anatoliy Kinakh said.
"We've managed to establish a dialogue with the State Fiscal Service of Ukraine and ensure that its management is aware of the existing problems and it is demonstrating its readiness to solve them. But all this takes time, though businesses today are losing revenue from sales, are unable to fulfill contracts, delay payment of wages and find ways to handle contractors' indebtedness. We understand the need to eliminate the so-called tax pits, but isn't this way a too high price for a polite taxpayer and producer that works in keeping with laws? Instead of improving the business climate, which would ensure economic growth in the country, we are again seeing fiscal pressure grow amid poor judgment and the unacceptable indifference of authors of the tax amendments towards the producer," Kinakh said.
In his words, during the development and discussion of the legislation on electronic VAT administration, due attention was not paid to the proposals put forth by the industrial community. There was no expert analysis of possible consequences of the introduction of the system. Gross methodological errors were made, which led to the incorrect operation of the system. The result was that many tax payers got a negative value according to the set formula, which required additional spending on covering the artificially created, negative level of the registration amount.
"What we are particularly outraged at is that officials that are guilty of introducing the methodologically wrong algorithm for calculating the registration amount, of methodological errors in the electronic VAT administration system, do not bare any responsibility. They shifted the responsibility onto taxpayers, who paid for these mistakes with money squeezed from the production process. We insist that civil servants, who – by their action or inaction – did harm to an entrepreneur, must be held to at least administrative responsibility for this or be dismissed. I think when it comes to large-size damage; one should raise the issue of criminal liability. Otherwise businesses won't be able to develop in our country," Kinakh concluded.
Representatives of the business community described the refusal of the State Fiscal Service's agencies to refund the taxpayers the overpaid amounts of taxes from the budget and from an electronic account as unacceptable and a gross violation of laws.
The findings of a survey conducted by the ULIE shows that 74.4% of those polled had extra payment of the tax to electronic accounts due to the error in the formula. As a result of this, the taxpayers received a smaller tax loan from suppliers in June-July 2015 and failed to register their tax invoices. The respondents spoke about a significant decline in sales in July 2015. They also pointed to the failure to pay wages, growing debts owed to contractors, penalties imposed by buyers, and loss of revenue from sales. This is the result of tax innovation in the form of electronic VAT administration.
Kinakh said a letter had been sent to the President and the Prime Minister, requesting that they take urgent measures to remove the negative effects of the electronic VAT administration system. They are also asked to more carefully and attentively handle changes in the business climate in the country.