According to the State Treasury Service of Ukraine, the State Budget received UAH 8.3 million for the three months of the one-time voluntary declaration of income and assets of Ukrainian citizens. Assuming that the average rate of this fee is 5%, we can estimate that amnestied assets for the corresponding period are a modest UAH 166 million.
However, the chairperson of the parliamentary committee in social networks talked about UAH 51.7 million of collected revenues to the state budget and the total amount of declared assets of just over UAH 1 billion! If we take into account even these unofficial data, then big words that “the amnesty is gaining momentum” still look like an exaggeration – wishful thinking.
Notably, about USD 200 billion of our compatriots’ assets is hidden in the offshore jurisdictions, which is more than the record Ukraine’s USD GDP this year. Let us not mention a lot of shadow money, money in the hands of the population and other “little things” also measured in USD billions. Therefore, the amnesty of even one billion hryvnias does not impress and does not work. It is already obvious that the campaign of voluntary one-time declaration of income and assets by Ukrainian citizens is unlikely to have any noticeable results. Moreover, if we remember that four of the twelve months for the amnesty have already passed, there is surprisingly little time left.
To be fair, the timing of this campaign was not a good one.
First, Ukraine is under constant threat of a full-scale military invasion by Russia. So, in such circumstances we can hardly expect a further acceleration of the pace and degree of the declaration. Money, as you know, loves silence.
Secondly, it is not known when the COVID-19 pandemic will end, which is the reason of uncertainty, uncertain future and significantly changes the consumer priorities and peoples’ expectations around the world. Our state, against the background of more successful examples of countering the pandemic by other governments, does not look the most favorable in the focus of public opinion and people’s attention. The world elite states a crisis of confidence in global state institutions, and in the post-Soviet countries it is manifested to the greatest extent.
In addition to objective external adverse factors, we can also see many subjective failures. Trust is the cornerstone and, at the same time, the key to success in matters such as voluntary declaration or voluntary payment of taxes. Actually, the results of this campaign could be a quantitative indicator of the richest Ukrainians’ confidence to our state. However, it is obvious that it is hardly possible to talk about trust in the case of the Ukrainian present. Unfortunately! The discrepancy between promises and actions is one reason for this. This is what Nobel laureate Joseph Stiglitz emphasizes in his book “People, Power and Profit”, saying that “there can only be trust if there is a belief that the political system is fair, and that our leaders are not just working for themselves. Nothing destroys trust so much as hypocrisy and gaps between what leaders promise and what is delivered”.
If there is no trust in the state, there must be at least administrative ability, and it is not there either. It is sufficient to mention at least the inconsistency and discrepancy of the declaration campaign developers’ position on the use of indirect methods of assessing tax liabilities and, consequently, the assets of citizens. At the beginning it was said that indirect methods would not be used. Then there were conflicting messages from the Ministry of Finance and people’s deputies, today they say that income can be verified starting from 1995! I would like to immediately reassure everyone that this will not happen. First, no one has excluded Article 102 of the Tax Code of Ukraine on the statute of limitations for tax liabilities. Secondly, the tax authorities do not have any information or labour resources for this kind of inspection. This, by and large, does not make sense, because the richest should be checked, and this requires, above all, political will. The latest Memorandum signed by Ukraine with the IMF states that a specialized unit focusing only on High-Net-Worth taxpayers (High-Net-Worth Individuals) should be established within the structure of the State Tax Service, but things have not got forward an inch. This is something like an office for working with large taxpayers, where there should be individuals instead of businesses.
In contrast, the United States can be a good historical example of state capacity, where the well-known FATCA law was passed in 2010, which unilaterally introduced automatic exchange of information between foreign banks around the world and the Internal Revenue Service (IRS). Financial institutions are required to provide information on the U.S. account holders, and if there is a failure to report or any other non-compliance, the financial institution will be in default which means that penalties may be imposed and any sums paid to the financial institution in the USA will be subject to penal rates of withholding taxes (30%), which the financial institution may have to bear, rather than the client. Even Swiss banks, famous for their secrecy, quickly became compliant and cooperated because of the US government’s tough stance on the issue. The result of such actions was the return of billions of dollars to the budget in the form of additional tax revenues.
Therefore, not only the compliance of political promises with real affairs, but also the ability to implement good intentions in life gives rise to trust in state. We must state that we have big problems with this. In case of the voluntary one-time declaration campaign, the problem is not that the state budget will have received meager funds by September next year. Nobody, not even the developers of this project, were counting on them. The big problem is that another chance for Ukraine is lost, and there are not so many ones left! The next step is pension reform and, God forbid, we should mess it up, since it is impossible to count on its success without trust and understanding in any case.
Doctor of Economics, expert of the Growford Institute Kostiantyn Shvabii for Lb.ua.