Expert: Hetmantsev wants to neutralize entrepreneurs' pressure to reboot tax authorities with "White Business Club"

The goal of the bill by the head of the Rada's tax committee, Danylo Hetmantsev, to create a "white business club" is to split entrepreneurs and level their pressure to demand tax reform. Implementation of this legislative initiative will result in most businesses becoming risky. This opinion was expressed in an exclusive interview with UNN by Volodymyr Dubrovsky, senior economist at CASE Ukraine, chief expert of the Tax Reform Group of the Economic Expert Platform.

• The Rada passes in the first reading Hetmantsev's bill on the "white business club". It has been criticized by the Business Ombudsman, the CJU, the EBA and other experts. What do you think of this legislative initiative? Don't you think that such a "club of the elite" will create discriminatory conditions and expand the field for corruption among tax officials?

• Certainly, and even worse. In fact, the main thing here is that this draft law seems to look like something that will make everything better for some part of the business, some part of the MPs. But in fact, its purpose is to split the business and level its pressure, because the business demands a real tax reform and a reboot of the tax system itself. If we had a situation where there was a clear law: both the taxpayer and the inspector could definitely determine whether taxes were paid in full or not, then perhaps something like this (the "white business club" - ed.) could happen. But in fact, we have such a situation only in the simplified taxation system, and that is why the tax authorities are trying so hard to destroy it under any pretext. 

In the general system, we have an income tax that is discredited by its nature. That is, it is impossible to say for sure whether it was paid correctly or incorrectly. And always, if you want, you can just come and charge something extra, and then the taxpayer has to decide whether he will negotiate with the tax authorities or go to court to appeal. 

If he makes a deal, he is a good taxpayer for the tax authorities, a "white" one. It is those who negotiate that will be considered "white" and the tax authorities will have no complaints against them. As for those who don't want to be friends with the tax authorities and will sue,  if a taxpayer sues, he or she will have a tax debt and will automatically fall out of the "white business club". That is, whether the taxpayer will be in this "club" or not will depend on his relationship with the tax authorities. 

Under such conditions, I assume that if  this mechanism is applied, there will be just some kind of membership fee, not formal, of course, which will mean that for such an amount you will receive the privileges that the "white business club" has. If you don't pay it, or if you are in favor of rebooting the tax service, of tax reform, then, sorry, but you will not be in the "white business club".

Then there is the situation for which all this is being created, when business is divided into two categories: one is "white" business, which does not demand any reforms, because demanding reforms is more expensive for itself. And all the others are "non-white" businesses, risky businesses, but they demand reforms because they don't want to pay taxes.

You see, the "white" people, those who pay taxes, do not demand any reforms, they are satisfied with everything, they trust the tax authorities. And all those who do not trust the tax authorities are some kind of "evaders". This way, the pressure of the business community to reboot the tax authorities and implement a real tax reform, including the replacement of the income tax with the tax on withdrawn capital, which cannot be charged like this, is leveled. 

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• Is business ready for such an innovation? Or does Hetmantsev want to split entrepreneurs among themselves by dividing them into castes so that they cannot oppose him with a united front?

•   That's exactly what I'm talking about. Of course, there is a part of business that is ready to lobby for this bill, the business that is good friends with the tax authorities. They have a godfather, a brother-in-law, a brother or some other relationship, and they have this as their competitive advantage. I personally have not met in my life... I was an entrepreneur myself, I have been working with entrepreneurs as an economist for a quarter of a century, and before that I was also engaged in business consulting... I have not met a single entrepreneur who would trust the tax authorities. Therefore, some percentage of those who, according to surveys, trust the tax authorities are probably those who have some personal relationships with them. 

In practice, we know that there are a lot of them, and, just like at customs, there are informal "white lists" of those who are friends with the tax authorities and use the tax authorities, for example, to organize raids against their competitors. And we have such a practice. Therefore, of course, the dishonest business that uses the tax authorities for its own purposes  would benefit from this "club". The rest would lose, and that is why business is mostly against the draft law.

• What will happen to the business that does not get into the "Hetmantsev club"? Will it be subjected to inspections? Is it possible that Hetmantsev is pushing this law to suit his own companies, i.e. companies loyal to him?

• In fact, this approach, that there are more risky taxpayers and less risky ones, is theoretically correct. And if we were talking about a country with European rules, there are definitely certain criteria there, and they are much better than those that are spelled out here (in Hetmantsev's bill - ed.). In European countries, these criteria distinguish a really small group of risky taxpayers who are indeed sometimes audited, while all the rest are not audited at all. And all the privileges that Hetmantsev's bill grants to the so-called "white business club" are the same as in European countries by default. That is, the tax office always gives consultations in a short time, it must share with the taxpayer all the information it has about him. These are just the usual rules of civilized relations between service providers. In our country, the tax service has essentially remained an inspection. 

But all these "white lists" don't work in the current situation in Ukraine, when there are already a lot of informal privileges and everything is based on them. If  we had a truly risk-oriented system that worked, focused on those few percent, it would indeed turn out that these 10-15% of risky enterprises would be subject to inspections. 

But here the situation is the opposite: according to the criteria set by this draft law, the vast majority of enterprises will be classified as risky, and only a small caste will be white. 

Let's take the criterion of a tax burden that is higher than the industry average, a criterion that the tax authorities now de facto use as a criterion of riskiness. But it's easy to see that according to this criterion, about half of taxpayers will be in the risky category, no matter what they do. This is purely mechanical. Because there is a certain distribution, and they are at the bottom of this distribution.

Secondly, the industry. Industry is a very conditional concept. In the Soviet Union, there were sectoral ministries, and an enterprise that belonged to a certain sector was subordinated to the ministry. Today it is a conditional concept. A simple example: there are two factories, one of which sells its products the way it used to, through a sales department, and the other one has taken lectures at a business school and focused on key competencies, created a separate company for production and a separate one for sales - a trading house. This is considered more progressive. But the second plant will always be at risk, because the total profit generated by this enterprise will be divided between two legal entities - between the plant and the trading house. So this is a completely inappropriate criterion. And they deliberately set it up so that the vast majority of businesses would be at risk.

I don't think they will have the resources to be overwhelmed with inspections, because there will be too many risky ones, but of course it will increase the burden on risky ones, at the expense of those "white" ones who know how to negotiate with the tax authorities. 

• There are a lot of complaints about the blocking of tax invoices and the inclusion of companies in the list of risky ones. Even the National Security and Defense Council discussed this issue, but the situation has not changed. Is it possible that Hetmantsev wants to legalize such pressure on business by the tax authorities and take the State Tax Service out of the picture with this draft law? 

• In fact, Mr. Hetmantsev personally described all the shortcomings of the tax service to us at a meeting once, very well. It was the rare case when I agreed with him completely. Moreover, he is a co-author of the draft law on rebooting the tax service,  and this draft law is quite good. That is, with one hand, Mr. Hetmantsev submitted such a bill, but unfortunately, it is not moving anywhere, and with the other hand, he submits a bill that actually negates support for the reboot of the tax office. I don't know, I'm not his judge, I'm not his confessor, as they say.

If we talk about the automated system for monitoring the compliance of a tax invoice or calculation of adjustments with the risk assessment criteria, this is a very vivid example of how risk-oriented procedures do not work in our country. What I just told you - it was just realized in the SCCR. 

This system was created with very good intentions. I personally know the people who did it, and I told them at the time that they were doing it with good intentions, but there was a very high risk that it would turn into what it eventually did. Precisely because of political, economic, and institutional considerations that they did not take into account. And now the same people are fighting against the SMKOR, they are forced to fight. They thought that it would protect "white" business and allow for timely VAT refunds and generally reduce VAT administration to only those who actually violate the law. However, as soon as the PCS was in the hands of our tax authorities, they turned it into an instrument of mockery and extortion.

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Therefore, this system could be reformatted in some way. First, it is necessary to establish strict criteria for what and how the tax authorities should do when they block a tax invoice. Currently, they block a tax invoice but do not conduct an investigation. That is, there is a possible crime, perhaps there is some kind of tax loophole, but it is not being investigated, because if it is investigated, it can lead to ourselves. Therefore, the first conclusion that comes to mind is that if they block the invoice and do not investigate, then the actions of those who blocked it should be investigated. Of course, it is the computer that blocks it, but those who did not investigate the reasons should be investigated.

Secondly, if something is blocked, it should be either investigated or unblocked within a month, but again with some consequences. That is, this will automatically create an incentive to block only a small part of the invoices that the tax authorities can actually handle.

The risk criteria should be formed neither by the tax authorities nor by the Ministry of Finance. These bodies should not be involved in their development at all. They should be formed, for example, by the rebooted BES, because it is the BES that should investigate such major crimes, and it should have an analytical apparatus to establish what exactly can be a sign of fraud against which the AML system is aimed.

Finally, the very principle that these invoices are preventively blocked contradicts the presumption of innocence and European directives. And in this case, it is precisely the European directives that should be applied here. For obvious reasons, the EU pursues a unified policy on indirect taxes, and we simply cannot have such amateurish activities as the SMKOR. At the same time, it will be necessary to create a real system for investigating large-scale VAT fraud... This requires real tax authorities, a real BES. And I hope that someday everything will work differently here. But for now, this system creates many more problems than it solves.

Recall 

The Verkhovna Rada supported in the first reading a draft law that proposes to create a "white business club" with simplified relations with tax authorities for taxpayers with a high level of voluntary compliance with tax laws.

Nina Yuzhanina, a member of the Rada's tax committee, noted that the draft law proposed by Danylo Hetmantsev would divide entrepreneurs into privileged and non-privileged groups, giving preferences to some and subjecting others to stricter regulation, raising concerns about discrimination and corruption risks.

Business Ombudsman Roman Vashchuk criticized the draft law on the "white business club" initiated by Hetmantsev, saying that it would create a reservation for the elite instead of leveling the playing field for all businesses.

According to economic expert Yuriy Havrylechko, the legislative initiative of the head of the Rada's tax committee violates the Constitution of Ukraine and creates discriminatory conditions in the business environment. The fact that Hetmantsev's draft law contains discriminatory norms and has corruption risks is also stated in the conclusion of analysts of the Union of Ukrainian Entrepreneurs.