Ukraine loses millions of dollars in unpaid value-added tax (VAT) on goods, Vadym Melnyk, head of the State Fiscal Service said in an interview with news website RBK-Ukraine on March 9.
Ukrainian businesses often evade a 20% VAT, which is why the country loses Hr 4 billion ($145 million) a month, thus contributing to the country’s $30 billion shadow economy.
“Our work — destroying schemes and liquidating the shadow market — is not just about economic security, it’s also about helping business,” Melnyk said.
Melnyk is sure the only way to combat grey business and under-the-counter sales is to force all businesses in Ukraine to use cash registers. These machines register every sale, print out receipts and help the tax service cut tax evasion.
Last year, Ukraine’s parliament passed a bill to oblige more small businesses to use cash registers starting in January 2022 and make sure everybody pays the goods and services tax.
Experts believe, however, that mandatory-for-all cash registers will hurt small and medium-sized businesses, which have to spend $300 on one cash register and $200 annually to maintain it. They also have to hire an accountant.
According to economist Volodymyr Dubrovsky, small businesses can lose nearly $355 million when cash registers become mandatory for everybody. Some entrepreneurs, he believes, will stop declaring taxes altogether, increasing the size of the shadow economy.
Cash registers require constant communication with tax service officials, which may also increase corruption risks, according to Dubrovsky.
However, Melnyk said the State Fiscal Service is open to discussion with business owners.
“If there are transparent rules of the game, clearly defined by laws, business will not shy away,” Melnyk said.
