Expert: blocking of tax invoices is an additional financial burden on business, and not everyone can withstand it
Kyiv • UNN
Impact of blocking tax invoices on Ukrainian business
Myroslav Laba, an expert at the analytical center of the Union of Ukrainian Entrepreneurs, assessed the impact of blocking tax invoices on business operations in a commentary to UNN. The expert notes that not all businesses are able to withstand the additional financial burden that arises from the actions of the tax authorities.
Myroslav Laba notes that the problems have become more acute after the Cabinet of Ministers' resolution "On Approval of Procedures for Suspension of Registration of Tax Invoices/Calculation of Adjustments in the Unified Register of Tax Invoices" (No. 1165) was amended in October 2022.
"After these changes, the number of blockades has increased significantly. The government and the committee tried to reduce the number of blocking for business, but in fact, all the changes that were made to this Resolution 1165 did not give the desired result. According to the statistics provided by the tax service, about 25 thousand companies are blocked every month. And these companies - their number is not decreasing, and even I would say that it has been gradually increasing recently. According to the statistics provided by the tax authorities, in my opinion, in September, 20 thousand companies appealed the tax authorities' decisions, and 19 thousand were approved by the tax authorities, i.e. the business position was accepted, and the blocking was lifted. But the tax authorities say that not everyone appeals, since 6,000 companies did not appeal, it means that these 6,000 are risky companies, and so on. But this is also not true, because many companies do not appeal against the tax authorities' decisions because it takes a very long time. That is, today, filing a lawsuit, court decisions, enforcement of a court decision - all of this takes a year or more. We have companies that have been suing for two years over tax invoices, and then have to wait for the tax service to enforce the court decisions," Laba said.
He explained how the situation with the blocking of tax invoices affects business.
"How does this affect companies' operations? It has a very negative impact. Because in fact, this is, firstly, a blocked credit, meaning that a company must pay tax in advance on a blocked tax invoice. And secondly, it is the cost of the appeal, the court decision, and so on. That is, today one blocked tax invoice means, as the business says, 12 hours of document preparation, 30-40 different documents that need to be attached to this tax invoice. These are expenses, and some companies also say that they do not have two or three additional accountants to register tax invoices, unblock them, and prepare documents. This is an additional financial burden on the business. Some can handle it, while others cannot. If we look at the general statistics on the number of VAT payers reported by the tax authorities, this statistic is negative. Someone goes abroad, someone closes down, someone goes into the shadows," the expert explained.
Laba cited an example of a company from Odesa that submitted a table 11 times to register tax invoices.
"She submitted it 11 times, and the tax office rejected it 11 times. After the Business Ombudsman Council intervened, the tax office accepted the table. It turns out that for some far-fetched reasons, the tax authorities are denying businesses their legitimate activities. Why is this happening? Who should solve the problem? The issue can be resolved by the Verkhovna Rada Committee (the specialized committee of the Verkhovna Rada headed by MP Danylo Hetmantsev - ed.) by making certain changes to the Tax Code, and it should also be the Ministry of Finance, which should establish some control points to change the system of blocking tax invoices and appealing them," the expert believes.
According to Laba, the statistics on tax invoice blocking varies by region: in some regions, the number of blocked invoices has increased three to four times, while in others it has decreased by half.
"In my opinion, this story, the bad story of corruption risks and the blocking of tax invoices, is very much influenced by the attitude of the local authorities to this work. In some areas, where there is a positive attitude and people really look at it objectively and make decisions, this statistic is positive and it is decreasing, but where there is some pressure on business, a desire to receive some additional revenues or some additional gratitude, the number of blocking increases," the expert noted.
He noted that from the point of view of budget revenues, the tool of blocking tax invoices can be viewed as positive, but in general it is harmful to the economy.
"This tool may have the right to live, but it should not harm the economy," Laba said.
He added that the parliamentary committee headed by Hetmantsev, as well as the Ministry of Finance and the Ministry of Economy, should find a balance to solve the problem.
