The Ukrainian Ministry of Finance now can find out what bank accounts are assigned to Ukrainians who are seeking public money, how much money they have in accounts and account history.
Earlier this data was protected by bank secrecy and could be revealed to authorities only after a court ruling. Parliament adopted changes to bank secrecy allowing the Finance Ministry to access the information with a simple written request to the bank.
So why does the government need to know the private financial information of its citizens?
The information will enable the ministry to verify the data provided by the candidates for social security payments, benefits, subsidies, pensions or salaries.
Thus, the ministry hopes to means-test public benefits so only the truly needy receive assistance from the state budget.
“The collected facts will help to distribute with maximum targeting nearly 400 billion hryvnias ($16 billion) which are now paid in social security programs,” according to the Finance Ministry press service. “That, in its turn, will help to provide the really destitute people with an adequate level of support and speed up social standards increase.”
The measure will hopefully eliminate fraud, for instance, when monthly aid is provided years after a person’s death or when a state enterprise pays salaries to fictitious employees.
The Finance Ministry estimates that the verification will save at least 5 billion hryvnias ($203 million) in 2016.
“Social security is the biggest expenditure article in the Ukrainian budget. So, there are a lot of mistakes, corruption and embezzlement involved in its distribution,” Pavlo Kukhta, an expert from Reanimation Package of Reforms think tank, told the Kyiv Post.
Ukraine is spending 15 percent of its gross domestic product on its pension system only, a high percentage in the world. At the same time, the pensions do not offer decent retirement to most elderly Ukrainians. The majority of public sector employees who get their salaries from the state budget also live below subsistence level.
“The introduction [of means testing] is absolutely fair in respect to Ukrainian taxpayers,” Olena Korobkova, the executive director of the Independent Association of Banks of Ukraine, told the Kyiv Post. “We should not forget that the budget is filled with taxes paid by citizens and it is illogical when this money is spent on subsidizing clandestine millionaires whom former public servants often turn out to be.”
The initiative has met criticism from some bankers. Some complained that banks might lose the trust of their clients if they start disclosing their financial secrets to the government. Others were concerned that the means testing could trigger a massive withdrawal of deposits by recipients of the social benefits.
Korobkova, however, assumes the initiative won’t change the behavior of bank clients.
“Nothing is likely to change for a person who is not hiding their legal income from the government and is seeking welfare,” Korobrova said. “It will be easier and cheaper to refuse from the subsidies for those who have significant savings than to close their bank accounts and keep big amounts of cash at home.”
Kyiv Post writer Olena Savchuk can be reached at [email protected]
