The recent changes made to international taxation rules provided by base erosion and profit shifting (BEPS) and likely never-ending domestic tax reform in Ukraine, force taxpayers to live and operate in “waiting mode”. Business in the coming year is likely to be not as usual, as domestic corporates and multinationals should carefully reconsider their business structures and international transactions. Svitlana Musienko, who recently joined Sayenko Kharenko as a tax partner, outlines what to expect from the increasingly complex set of regulations in the ever sensitive area of tax.
UJBL : How would you assess ongoing tax reform in Ukraine? Could you single out definite achievements and certain failures that have, in your opinion, taken place?
Svitlana Musienko: Tax reform in Ukraine generates a lot of interesting ideas, but many of them will never be implemented. There are no apparent achievements to date which are “tangible” or bold enough to be pointed out as quick victories. There have been some positive moves, such as the introduction of some useful electronic services for taxpayers. Besides, over the past couple of years, Ukraine has climbed up several places in the World Bank’s ‘Doing Business’ ranking.
However, these improvements don’t alter the overall picture. Clearly more remains to be done. It’s fair to say that the business community and society in general are disappointed with the pace and quality of reforms in this sensitive sphere.
Recently, the government declared the upcoming separation of the State Fiscal Service into two institutions: the State Tax Service and the State Customs Service. Both of these state institutions will be supervised and coordinated through the Minister of Finance. This aims to “re-load” the bureaucratic and notoriously corrupt system, de-militarize the State Fiscal Service, and enhance the quality of services provided by the state to taxpayers. Ironically, moves in the opposite direction in 2012-2013 with the unification of two separate institutions within the Ministry of Fees and Revenues took place under the same slogans. Many experts are now urging a comprehensive institutional reboot reaching well beyond these formal but potentially superficial splits. It remains to be seen whether this exercise will result in any long-awaited improvements.
In addition, we have recently seen the organization of a dedicated department within the State Fiscal Service responsible for transfer pricing (TP) and international tax matters. This is a positive move. Ukraine has to follow international trends in tax transparency. Having a dedicated task force with a high level of technical expertise is crucial to bring TP and international cooperation on tax matters to a new level.