Businesses assess the taxation system in Ukraine worse and worse – study
24 December 09:56
The integral score of the Tax Index has decreased to 2.64 points out of 5 possible and continues to be negative – in 2023 it was 2.85 points. These are the results of the new wave of the Tax Index survey in 2024, conducted by the European Business Association and EY in Ukraine, Komersant ukrainskyi reports.
According to the survey, 59% of tax experts rated the current tax regime in Ukraine as satisfactory, although 36% believe that it hindered business development and investment, and only 5% believe that it contributed to the development of their business.
What factors influenced the assessment of the tax regime
Quality of tax legislation. This factor received the lowest score among the components that influence the calculation of the index. As in the previous year, the quality of tax legislation received a low score of 2.46 points (in 2023 – 2.63). Half of the respondents, namely 52%, consider it satisfactory. At the same time, the share of experts who consider tax legislation to be of poor quality has increased from 39% to the current 43%, while the number of those who consider it to be of high quality has decreased from 9% to the current 5%. According to the respondents, constant changes, contradictions and ambiguous provisions, as well as its complexity, have the greatest negative impact on the quality of legislation.
Tax administration. 44% of respondents consider the procedure of tax administration and preparation of tax reports to be burdensome. This year, this factor received a score of 2.62 points. At the same time, 41% rate this procedure as satisfactory and only 15% consider it easy (17% in 2023).
Respondents complain the most about the amount of time spent on preparing tax returns and paying taxes, the hasty introduction of new rules and insufficient time to adapt to them, and their lack of clarity. It is worth noting that these factors that negatively affect the experience of preparing and submitting reports have remained unchanged in recent years.
Quality of tax services. This index has also decreased – from last year’s 3.03 to the current 2.79 points. Only 20% are satisfied with the quality of tax services (31% in 2023), 37% are dissatisfied (21% in 2023). Another 43% rate the quality of tax services as satisfactory.
According to 31% of respondents, it was easy for them to contact the tax service (last year the number was 46%), while 25% found it difficult to do so. In 11% of the surveyed companies, the issues were resolved in a satisfactory manner, in 70% – partially.
Increased fiscal pressure. Survey participants reported that fiscal pressure on business has increased this year compared to last year. Among the components of the index, the assessment of fiscal pressure showed the largest drop. However, it remained quite high compared to other components. Accordingly, the fiscal pressure score decreased from 3.07 to 2.7 points. Only 7% of respondents did not feel any pressure on their company in 2024, while 14% felt almost no pressure. At the same time, 41% report significant fiscal pressure, 38% – moderate.
Traditionally, among the manifestations of fiscal pressure, businesses have identified unreasonable interpretations of tax legislation by regulatory authorities – 78% of respondents report this. The number of complaints about unreasonable information requests (64%) and artificial blocking of tax invoices (30%) has increased significantly. Tax audits are reported by 33% of the surveyed companies.
How to perceive such low ratings of the tax regime in Ukraine
Nataliia Artemchuk, Manager of the EBA Tax and Customs Committees, states that the assessment of the tax system, unfortunately, reached a neutral score only once, in 2021.
“Studies for all other years have shown a negative assessment of the state of affairs in taxation by businesses. The anti-leaders were and remain the quality of tax legislation and the complexity of administration. Therefore, improving the situation in these areas should be a priority for the relevant government agencies,” the expert concludes.
According to Nina Yuzhanina, MP, the fact that since 2021, the integral assessment of the Tax Index by the survey participants has been constantly decreasing and the same decline is observed in all components of the index is predictable.
“The trend from the authorities is a large number of ill-considered changes, complication of procedures, lack of explanations, and loose interpretation of tax regulations,” the MP emphasizes.
According to Nina Yuzhanina, it is no coincidence that business is assessing the taxation system worse and worse.
The EBA Tax Index survey has been conducted since 2011. The index consists of four equivalent components: quality of tax legislation; burdensomeness/ease of tax administration; fiscal pressure; and quality of tax services. In the current wave of the survey, 81 tax and finance professionals from the EBA member companies took part. The survey was conducted from November 25 to December 11. The survey partner in 2024 is EY Ukraine.
