Igor Bilous: Introducing electronic system for VAT administration is the first step towards comprehensive reforms of taxation system


Kyiv, 1 August 2014 – “Introducing electronic system for VAT administration voted by Ukraine’s Parliament yesterday is the first step towards comprehensive reforms of the taxation system,” said Igor Bilous, Head of the State Fiscal Service of Ukraine at a briefing in the Ukraine Crisis Media Center.

Pavlo Sheremeta, Minister for Economic Development and Trade of Ukraine added: “Improving VAT administration was on top of the list at the meetings I had with entrepreneurs, managers and companies’ management. Today with joint effort we’re introducing electronic VAT administration that in the future will make abuses impossible and will increase budget revenue.” According to various estimations the revenue amount constitutes from UAH 12 to 20 bln.

“Preconditions to introduce the system of electronic administration became drawbacks of the current system to include the possibility for unscrupulous tax payers to evade tax liabilities and get VAT reimbursement from state budget with no grounds through the so-called tax loopholes; imperfect system of VAT administration as well as the market of tax minimizers that creates unequal opportunities for law-abiding tax-payers as they face the heaviest tax burden. Apart from that abusive schemes are the source for unaccounted cash that leads to tax evasion relevant to other taxes, for example income tax and unified social contribution,” explained Mr. Bilous.

“The system of electronic administration was introduced specifically to get rid of the tax loopholes, – continued Head of Ukraine’s State Fiscal Service. It is expected that electronic administration will make it impossible to form fake credit and get unlawful VAT reimbursement from the state budget, another expected result is the increase of VAT return to the budget. It is extremely important as VAT is the main taxation source for Ukraine’s state budget, its share in tax return is 40%. In my opinion its potential in filling in the budget is not yet fully exploited”. Apart from that scales of shadow economy in the country will decrease as well as the state expenses at VAT administration. Among the system’s advantages are also less pressure on business, decrease of human factor and of corruption, simplification of tax accounting.

Administration system functions in the following way: automatic accounting of paid VAT for tax payers is introduced, free bank accounts for VAT payers are automatically opened, tax filing is held electronically as well as their registration in the unified e-registry of tax invoices. In order to have the tax invoice registered tax payer needs to have enough amount of tax credit confirmed by tax invoices listed in the registry or import VAT paid. In case of insufficient credit amount the payer has to fill in the account in the VAT e-administration system at his/her own expense. Registered tax invoices will grant the right to tax credit, based on the tax declaration and according to the amount stated in it or from the account in the e-administration system the tax amount will be transferred to the budget or on the contrary VAT will be reimbursed from the budget to the current account.

The Head of Ukraine’s State Fiscal Service drew attention to the fact that the law comes in force on 1 January 2015. Mr. Bilous also underlined that VAT is the first tax subject to changes, as a next step unified social contribution will be reformed, respective draft law is being finalized by the working group and is being agreed by the ministries. The draft law foresees rate decrease of the unified social contribution. Its submission for Parliament’s consideration is scheduled for mid August. “In my opinion this draft law will be supported by the MPs and voted in by the Parliament in the nearest time,” commented Igor Bilous.