The poor work of government agencies leads to an annual budget shortfall of about UAH 9 billion from the sale of alcoholic beverages, competent agencies in 2019-2020 and over nine months of 2021 also did not provide an effective system of control over production and circulation of alcohol and administration of the excise tax.
These results were announced by auditors of the Accounting Chamber following an audit of the planning efficiency and control over the completeness and timeliness of a receipt of the excise tax on alcoholic beverages to the state budget on the department’s website on Tuesday.
“According to the World Health Organization, the share of illegal alcohol in Ukraine is more than a third of the total alcohol market and more than half of the strong alcohol market. Taxation of illegally produced and imported alcoholic beverages only can replenish the state budget from the excise tax by about UAH 9 billion a year,” the chamber says in a report.
The Accounting Chamber refers to the data of the State Tax Service, according to which production of alcoholic beverages in 2020 increased compared to 2019 by 11%, wine – decreased by 13%, and beer – by 0.5%. At the same time, according to the State Customs Service, imports of alcoholic beverages increased by almost 45%, wine – by half, and beer – by 11%.
At the same time, in 2020, the state budget received a total of UAH 42 billion of the excise tax on imported and produced in Ukraine alcoholic beverages, however, despite the increase in imports, the share of this tax in the total amount of tax revenues decreased from 1.9% in 2018 to 1.6% over nine months of 2021.
“The State Fiscal Service, the State Tax Service and the State Customs Service did not ensure proper intersectoral coordination on administration of the excise tax on alcoholic beverages, effective control of their production and circulation. This created the preconditions for illegal production and circulation of these products and, as a consequence, for the non-receipt of this tax in the state budget,” the chamber says in the report.
In addition, due to the poor work of the Ministry of Finance and the State Fiscal Service, the automated control system Electronic Excise Stamp has not been fully implemented, since the corresponding changes have not yet been made to the Tax Code and other legislative acts. The Accounting Chamber clarified that due to the software imperfection of the system for monitoring excise tax stamps, the State Customs Service inspectors still monitor circulation of excise stamps at customs posts mainly in paper, not electronic form.
The department recalled that in 2020 the State Customs Service did not plan and did not conduct documentary field checks, since the Ministry of Finance untimely approved the planning procedure by the customs authorities. At the same time, over nine months of 2021, the State Customs Service authorities conducted only two documentary checks of exporters of alcoholic beverages, as a result of which they additionally charged UAH 2.6 million in taxes (of which 0.8% was paid to the budget).
The auditors indicated in the report that the control by the State Fiscal Service bodies over the illegal movement of alcohol and alcoholic beverages was ineffective. During the study period (2019-2020 and nine months of 2021), customs officers seized more than 158,000 liters of alcohol, over 25,000 liters of alcoholic beverages and over 2 million stamps of excise tax, however, almost 74% of the seized alcohol was returned to the owners by a court ruling. According to the Accounting Chamber, this testifies to the groundlessness of separate decisions of the customs authorities, as well as the ineffectiveness of spending funds from the state budget to pay court fees in these cases.
“Based on the results of the audit, the Accounting Chamber recommended the government to improve legislation on administration of the excise tax. In particular, to speed up the implementation of the Electronic Excise Stamp full automated system of control over circulation of alcoholic beverages and tobacco products, to improve the licensing of activities in this area, and to streamline the trade in alcoholic beverages through the Internet,” the organization says.