Searching for balance
Struggling with the shadow economy
Oleksandr Klymenko worked out and implemented risk-oriented monitoring system of economic operations, which allowed to start solving two “eternal” problems – to reduce tax audits of business and improve the efficiency of detection of tax evasion, and as a result, increase incomes into the state budget for providing social payments.
For many years in Ukraine, all the state leaders were in front of unsolvable dilemma: the ratio of the quantity and quality of tax audit. On the one hand, tax and other inspections, especially at a high level of corruption – have been always meant discontented business, a serious disadvantage for the country’s investment attractiveness, the deterrent factor of the economy. On the other hand, the state, among other things, obliged to fight against tax evasion and provide the filling of the budget. The timeliness of social payments and the ability of the state apparatus to perform its functions depend on it.
The way out of this insoluble contradiction became risk-based monitoring of economic transactions, which was worked out and implemented under the guidance of Oleksandr Klymenko. It is about the comprehensive model that combines the analytical work, the introduction of modern IT-technology and the new format of the tax authorities.
Oleksandr Klymenko worked out the concept of risk-oriented system on the basis of his experience in business and in public service. Understanding the needs and interests of both business and the state helped him to find an optimal balance between reducing the burden on businesses and the state control over the “purity” of tax payments.
Analysts using the accumulated statistical material created a “portrait” of fictitious companies, which use the schemes of tax evasion. The main parameters natural for offenders – the so-called “risk criteria” were defined.
New search program worked on a database in order to find the firms similar to the models, which were created by the experts.
After that, the inspectors and auditors received a list of potential violators for inspection. The representative of the tax service could not appoint or cancel the inspection by a personal decision. This fact greatly reduced the possibility of corruption. In fact, inspection was «appointed» by a computer on clearly defined criteria.
Due to this set of measures and innovations, which were implemented by Oleksandr Klymenko during the management of the Donetsk Tax Service in 2010-2011, there was fixed a record number of monthly tax revenues. Thus, in November 2010, Donetsk region collected more than UAH 2 billion to the state budget – the highest indicator in the history of the tax service in the region, including the pre-crisis (until 2008).
After the creation of the Ministry of revenue and duties in 2012, information resources of tax and customs services were united. In addition, there was developed a comprehensive risk identification. This allowed to track the movement of goods from the border to the consumer, to increase the effectiveness of inspections (reducing its number).
In June of 2013, there was created a single Monitoring center – a powerful tool for the analytical and informational support of processes related to the deshadowing economy with the latest developments in IT, working in a 24/7 format. The developed system of risk identification was completely automated and eliminated the human factor and, therefore, any corruption.
Monitoring system distinguished “risk” of less than 1% of registered legal entities in Ukraine. That is, 99% of companies could not be inspected and could work without fear of undue attention from the state.
Targeted work with “risky” companies led to increasing incomes in half. The manipulation of one of the major taxes – VAT has reduced significantly.
As a result, the state has ceased to accumulate debt to this tax refunding and could finally start pay off the debts to the business. This balance of “fees / compensation” remained positive in state’s favor.
Oleksandr Klymenko implemented a transparent system of automatic VAT compensation, when the business received tax refund by all legal and clear criteria, including – incentives for companies to increase wages for their employees. By January 2014, the level of automatic VAT refund from the budget has reached a record 77% for Ukraine.
At the same time, the number of planned inspections of business has declined by four times during the three years. It was keep on declining.
Reform of the tax police, which was carried out by Oleksandr Klymenko in early 2013, has improved the effectiveness of the investigation of tax and customs offenses. In the structure of the Ministry there was created the Main Department of Financial Investigations. Maximum attention was paid to analytical work with minimal interference in the affairs of honest taxpayers. As a result, there was provided state reparations amounted UAH 1.8 billion in 2013. 60 “conversion centers” stopped its activity, more than 800 criminal offenses in the field of public procurement amounted UAH 1.3 billion were identified.
Oleksandr Klymenko planned the further development of risk-based monitoring in the following areas:
– creation of automated customs offices (“Customs Services of the Future”), which would make the decision to release the goods without customs inspector;
– transition of all taxpayers to electronic, remote tax inspections by 2016;
– joint-recurring business checks by the tax authorities and other agencies, inspecting the business based on the data on the risks derived from the monitoring center of the Ministry.
The long-term implementation, which was developed under the leadership of Oleksandr Klymenko, would significantly reduce the level of the shadow economy, in conjunction with the creation of prerequisites for the development of legal business and increasing of investment attractiveness of Ukraine.
Project management in public administration Listening to business
Tax reforms through the dialogue and partnership Eradicating the corruption
Systematic anti-corruption strategy Restoring justice
"The point of profit" - in Ukraine Searching for balance
Struggling with the shadow economy Removing the barriers
Support of small and medium business Implementing innovations
Electronic services for business and citizens Creating the future
Forming of tax culture Connecting the civilizations
Development of the international partnership