Ukrainians may soon have to make payments electronically for larger purchases.
At least, that’s the hopes of the National Bank of Ukraine, which wants to limit the shadow economy and boost tax revenues by curtailing large cash transactions.
But some worry about what form the new system would take and just how secure it would be.
The NBU has never hidden its interest in transforming Ukraine’s financial infrastructure and extending its control over it. Recent measures and proposals, from creating a central depository system to introducing a 10 percent tax on foreign currency sales, have all been supported by the NBU as reducing costs, increasing effectiveness, boosting tax revenues or moving the economy out of the shadows.
And that’s precisely why the central bank is now pushing for a transition towards an electronic payment system.
NBU documents reviewed by the Kyiv Post show that the central bank has studied electronic payment systems in other places and favors introducing such a system in Ukraine.
The benefits are seen as boosting tax revenues and reducing the shadow economy (officially estimated at one third of the country’s gross domestic product). Some also think such a plan will increase financial security, boost investment and reduce costs by eliminating the need to maintain such a large supply of cash.
The study notably looks at the examples of European and post-Soviet states that have introduced barriers to cash transactions, like Italy, which banned settlements in currency of more than 1,000 euros ($1,300) in early 2012. These measures were introduced by the technocratic government of Italian Prime Minister Mario Monti as a means to fight tax avoidance.
Among the measures suggested to help boost the usuage of e-payment, the report suggests: using such transactions for state expenditures; introducing temporary tax and customs benefits for e-trade operations; stimulating the use of e-payments by making acceptance of new tools obligatory at sales points; implementing ceilings on cash purchases; making salary payments directly electronic accounts mandatory; banning additional charges for electronic payments and improving the financial literacy of the population.
The switch could happen quickly. Indeed, work on setting up the payment system has been transfered from under the supervision of the State Commission for Regulation of Financial Services Markets to direct NBU oversight, an indication that the project is being fast-tracked, according to people close to the deal who are not authorized to make official statements.
Internationally, electronic payments are increasingly popular. But worries remain in Ukraine about the infrastructure, notably the possible creation of a national payment system. Among others, U.S. financial services company Visa has been vocal in its criticism of prior legislation aimed at changing the country’s payment system.
In a September interview with the Kyiv Post, Steven Parker, head of Visa operations in Southeastern and Eastern Europe, Russia and Central Asia, claimed that the creation of a national payment system from scratch could seriously compromise the security of such transactions.
The level of security obtained by current card providers like Visa, he argued, is the fruit of years of research and millions of dollars in spending.
“For a single body to start building something completely new – which will cost hundreds of millions – Where will that money come from? The banks or other people will be taxed, but in the end it will go back to consumers,” Parker said.
Kyiv Post editor Jakub Parusinski can be reached at [email protected]
