​The Ministry of Finance is checking possibilities for radical changes in the operation of the VAT-related risk assessment system

12/7/17

On December 6, Minister of Finance Oleksandr Danyliuk, his advisor Yana Bugrimova and other representatives of the Ministry of Finance and the State Fiscal Service had a meeting with representatives of the business community and experts regarding changes in the operation of the VAT-related risk assessment system which shall address challenges which business is confronted with due to gaps in its implementation and design.

“The system for the monitoring of VAT-related risks was launched to prevent manipulations and stealing from the state budget using fake VAT credit. This system is also an integral part of the automated VAT refund procedure for companies. At the same time, it really blocks some number of tax bills submitted by companies representing the real sector of the economy. It poses a serious challenge for business.

“Blocking the operations of diligent companies due to gaps in the implementation of the risk assessment system is unacceptable”, Minister of Finance Oleksandr Danyliuk said during the meeting. He added that this is a complicated issue which needs to be solved soonest and invited members of Parliament, experts and, first of all, representatives of business to participate in the discussion and analysis of the presented change options for the system and to share their own view on this.

The working group at the Ministry of Finance analyzed companies whose tax bills had been suspended and elaborated 5 scenarios for possible changes to the VAT-related risk assessment system to solve challenges confronting business. Some of these solutions were previously proposed by members of Parliament or experts.

It was agreed at the meeting that the system needs changes. Also, the participants of the meeting discussed possible scenarios and agreed that business, experts and members of Parliament will make a more thorough analysis and come back with proposals on these scenarios or other possible solutions to find the common position as soon as possible.

Previously, the Ministry of Finance and the SFS jointly implemented the following steps to close the gaps in the system’s operation:
1) amendments to decrees were adopted contributing to the following:
problems of agricultural companies were rectified through the automated registration of the process cards of companies;
possible problems for diligent taxpayers with the tax burden over 2% were prevented through the automated registration of the process cards of companies;
taxpayers can now submit their process cards prior to the suspension of their tax bills to prevent disruptions in the future;
criteria were amended to disrupt the manipulation of risk-related data and corrective calculations as well as preferential transactions aimed to generate fake VAT credit;
2) draft law No. 7240 was submitted introducing the principle of “silent consent” – a tax bill shall be registered automatically, if the respective tax authority fails to decide on this within 5 days;
3) the personnel of the SFS central office was increased by 150 persons to process requests and complaints regarding the stopped registration of tax bills;
4) investigations were initiated to examine possible abuse of office by SFS officials resulting in the creation of fake VAT credit.

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