Ukraine took a huge leap in ease of paying taxes, vaulting 41 positions in the World Bank’s tax payment index, part of the Doing Business Ranking 2018. It now ranks 43rd among 190 countries, up from 84th a year earlier.
Ukraine managed to improve its position because of several major changes to improve transparency and ease of payments. Among them are an automated and online value-added tax refund system, replacing a secretive and corrupt VAT system.
Ukraine has also moved more tax payments online, making transactions easier and more transparent.
All these changes “had a positive impact on our place in the taxpaying part of the ranking,” llya Neskhodovskiy, a tax expert at the Reanimation Package of Reforms think tank, told the Kyiv Post.
Despite the success in the tax payment part of the ranking, Ukraine managed to go only four positions higher in overall performance — now 76th among 190 countries, up from 80th place in 2017. The latest World Bank’s Doing Business ranking, released in October, measures the ease of doing business and overall success of 190 economies of the world. Ukraine’s ranking still places it far behind most of the European Union and former Soviet republics — with Russia ranking 35th, Belarus 38th and Moldova 44th.
The bright spot — the tax payment index of the Doing Business ranking — records taxes and mandatory contributions that a medium-size company must pay in a year and measures the administrative burden of paying taxes.
The 2018 ranking is based on 2016 performance.
According to the report, Ukraine has one of the lowest numbers of tax payments required: 6. Those are value added tax (20 percent), unified social tax (22 percent), corporate income tax (18 percent), military tax (1.5 percent), environmental and land taxes. By comparison, the overall leader Hong Kong has the smallest number of tax payments a year (3), while the average number of taxes that a company needs to pay in Europe and Central Asia region is 16.
However, it still takes a lot of time to pay taxes in Ukraine — 327 hours a year.
According to the Doing Business study, this is the time an entrepreneur spends collecting information, computing tax payable, completing a tax return, filing with agencies, arranging or withholding payments and preparing accounting records. The average time it takes in Europe and Central Asia region is 218 hours per year.
And in Luxembourg, the overall best performer in this category, it takes only 55 hours per year for all the procedures.
An average company in Ukraine pays 37 percent of its profits in taxes. The average for Europe and Central Asia is 33.1 percent of income and 40 percent in high income countries. But companies in 32 economies ranked pay only 18 percent.
Neskhodovskiy said that the decrease of the unified social tax from 41 percent to 22 percent in 2016 helped Ukraine to move from one of the highest tax burdens to the middle of the pack.
“Although the ranking analyzed the 2016 performance of the countries, we already had the automatic VAT refund system working then. It has been improved since then but still is not perfect,” Neskhodovskiy said.
The government reported that, in November and December 2017, the automatic VAT refund system paid more than Hr 4 billion to 3,000 Ukrainian enterprises that filed for reimbursement to the Finance Ministry.
Kernel agro holding is one of the top recipients, getting more than Hr 1 billion in VAT refund. ArcelorMittal, the giant steel maker in Kryviy Rih, got Hr 633 million reimbursed in November and Hr 659 million in December. The Iron Plant of Mariupol that belongs to billionaire oligarch Rinat Akhmetov’s Metinvest Holding got Hr 656 million in December and Hr 671 million in November.
