Irresponsibility in the State Tax Service: why permanent leadership is needed

The State Tax Service of Ukraine has long been in need of changes that would ensure transparency and efficiency of its work. A staff reset and a deep reform of the service are among the main requirements of both business and Ukraine's international partners. The absence of permanent leadership, a series of corruption scandals and questionable decisions only reinforce the need for systemic renewal. Experts emphasize that only a comprehensive approach to reform and a transparent competition for leadership positions will restore trust in the tax service and ensure the responsibility of its leaders for their actions and results, UNN writes.

Change time

Managers who hold positions in the "acting" status are often in an uncertain position. On the one hand, they have the authority to make important decisions, but on the other hand, the lack of full legitimacy in office allows them to avoid responsibility for the results of their activities. Both experts and international partners of Ukraine have repeatedly stressed that this situation increases corruption risks.

In addition, the "acting" status allows temporary managers to avoid public criticism more easily, as their activities can always be attributed to the temporary nature of their tenure. Therefore, the permanent management, which would be appointed through a transparent and competitive procedure, not only has the authority but also bears full responsibility for its actions.

According to the director of the Institute for Social and Economic Transformation, Ilya Neskhodovsky, the tax service cannot be an effective government agency without permanent leadership in office.

Please note that no one has headed the tax service for many years. The Tax Service is headed by the acting head (Tatiana Kiriyenko – Ed.). As a result, this person has neither responsibility nor authority, he manages the tax service manually. And as a result, today we do not have an effective institution

In addition, two of the three deputy chairmen of the state tax service – Vladislav Bugasov and Evgeny Sokur-are in the status of acting .

The latter, by the way, is a vivid example of how the lack of accountability encourages officials to violate the law, especially anti-corruption legislation. In particular, according to UNN, Yevhen Sokur entered probably inaccurate data in his declaration for 2023. In particular, he did not indicate in the document the information about his partner. During the investigation into the case of an alleged attempted assassination attempt, Sokur himself told law enforcement officers that since 2016 he had been living with a girl named Alina in an apartment at 6-D Lobanovskoho Avenue. Following a deputy appeal by Nina Yuzhanina, a member of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, the NACP launched an investigation into Yevhen Sokur. In response to a request from UNN, the Agency also confirmed that it was conducting the monitoring.

Kateryna Butko, head of the NACP's Public Council, noted that the National Agency for the Prevention of Corruption is checking whether Sokur and his partner Alina had a common household.

Also, in 2022, he declared income from the sale of securities in the amount of UAH 2.6 million, but these funds were not reflected in his declaration for 2023. This may indicate a violation of the law requiring notification of significant changes in property status. According to Article 52 of the Law of Ukraine "On Prevention of Corruption," the declarant is obliged to report such changes within 10 days. According to Oleksandr Zolotukhin, a member of the National Bar Association, the official may try to explain why he did not declare these expenses by saying that he leads a lifestyle and, for example, likes to eat out.

In addition, Sokur is a defendant in a criminal proceeding opened on November 4, 2022, under Part 3 of Article 365 of the Criminal Code of Ukraine on the fact of abuse of office by Acting Deputy Head of the State Tax Service of Ukraine Yevhen Sokur. The case was opened because on October 26, 2022, Sokur signed an order to revoke the license of PJSC Ukrtatnafta for the production of fuel. Such actions of the official, according to the investigation, caused severe consequences for the company and the state in the form of the inability to fulfill the mobilization tasks of the Ministry of Defense for the production and supply of petroleum products for the needs of defense and defense capability of the state. According to the SBI, this criminal proceeding is still under investigation.

Competition is the key to transparency

A complete reboot of the tax service could solve the problems associated with corruption and irresponsibility. The new leadership of the State Tax Service should be selected in an open competition with the participation of experts trusted by society.

According to Illya Neskhodovskiy, this approach to personnel appointments will help restore confidence in the tax service and ensure that its leadership is honest professionals.

It's always time to adopt appropriate procedures that allow us to select a head who meets the criteria of professionalism and integrity in an open competition based on the decision of a commission with representatives we trust, and this should definitely be done... Therefore, for this institution to be effective today, we really need to change approaches and select the head of the tax office in this way. This is  a step towards restoring trust in this body

It is worth noting that it is important that this competition be conducted under the supervision of independent observers, in particular representatives of international organizations such as the International Monetary Fund (IMF) and the European Union, who have repeatedly called on Ukraine to deeply reform the tax sphere and called for the involvement of foreign observers in competitions for positions in state bodies.

The authorities should understand that an open competitive procedure for selecting the management of the state tax service should become a priority in reforming the tax system of Ukraine. This will not only help attract professionals to management, but also restore confidence in the tax service, reduce corruption risks, and ensure that managers are responsible for their actions. Without these steps, the state tax service will remain in the shadow of constant scandals and abuses that harm both the country's economy and its international reputation.

Presumption of malice

The problems that exist in the work of the state tax service are connected not only with the irresponsibility of the management and the scandals in which it appears. Entrepreneurs are increasingly complaining that the Tax Service has become a punitive body, where objectionable businessmen are chosen exclusively manually. As business ombudsman Roman Vashchuk noted, business problems arise not because of the level of taxes, but because of the style of administration.

According to him, the level of trust in the tax authorities among entrepreneurs is currently very low. "We see a certain presumption of malice on the part of the tax authorities and government agencies. That is, a taxpayer is a potential violator of tax laws rather than a law-abiding taxpayer who may make some mistakes and needs help," Vashchuk told .

Experts interviewed by UNN note that this situation has developed due to the introduction of the concept of "risky enterprise". This idea belongs to the chairman of the Verkhovna Rada Committee on finance, tax and customs policy Daniil Hetmantsev, who is called the "gray cardinal" of the tax service in the media.

In particular, the automated system for monitoring compliance of the tax invoice/adjustment calculation with the risk assessment criteria (SMKOR), according to experts, allows tax authorities to manually classify businesses as "risky" and block their tax invoices and adjustment calculations.

"Recently, we made a presentation of analytics on blocking tax invoices for entrepreneurs in the CEO Club... In short and very general terms, we came to the only logical conclusion that most often the system blocks invoices (and stops the work of the enterprise) not because the businessman has violated something or his operation is risky. It's because they are unlucky," Yuriy Hudymenko, a former military officer and leader of the Democratic Ax party, told.

Granting the status of "risky" and withdrawing from it is not the only scheme that works in the tax service. According to the economic expert, analyst Pavel Sebastianovich also includes::

• fictitious export (this is when the documents passed through customs, but the goods were not moved);

• registration of fictitious VAT from fictitious companies;

• VAT refunds on fictitious exports;

• exporting goods under fictitious documents with fictitious VAT;

• real VAT refunds based on fictitious documents;

• twisting (imported bananas are turned into export grain);

• refusal to register a tax invoice and confiscation of VAT.

"I very much hope that after the change of power, Hetmantsev will flash on the pages and screens of the media for a long time – the BEB, the state Bureau of Investigation, and the NABU will investigate his legacy. Finance Minister Marchenko will explain why the head of the tax committee was not engaged in tax and customs policy by the deputy minister," Sebastianovich said.

Dmytro Alekseyenko, a member of the Council of the Association of taxpayers, believes that people's deputy, chairman of the tax committee of the Verkhovna Rada Daniil Hetmantsev is behind such a policy of administration, because no important decisions are made in the state tax service without his knowledge. And he actually manages the Tax Service through his former assistant Yevgeny Sokur.

In the opinion of MP Mykhailo Tsymbalyuk, in addition to a personnel reset at the State Tax Service, a deep reform of this body is needed. In particular, it concerns approaches to tax administration. "If we talk about the work of the tax service in general, it has not turned into a service, unfortunately," he said.