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.
The deficit of the Ukrainian state budget amounted to 1.4% of GDP in January-November, while 5.5% of GDP was projected in the law on the state budget, Prime Minister Denys Shmyhal said.
“Thanks to the balanced fiscal and debt policy, the state budget deficit amounted to only 1.4% of GDP over 11 months,” the prime minister said, opening a government meeting on Wednesday.
State-controlled PrivatBank (Kyiv) paid 80%, or UAH 19.4 billion, of profits for 2020 to the state budget, the bank’s press service has said.
According to the report, over the past three years, PrivatBank has directed UAH 55.4 billion to the state budget.
As reported, on April 28, the Cabinet of Ministers approved the distribution of the bank’s profits for 2020. In particular, in addition to paying dividends, the government allocated UAH 3.645 billion (15%) to cover the accumulated losses of previous years, and UAH 1.215 billion (5%) to the reserve fund.
On December 18, 2016, the government of Ukraine, referring to the proposal of the National Bank and the former shareholders of PrivatBank, decided to nationalize this largest financial institution on the Ukrainian market and injected over UAH 155 billion into its capital.
According to statistics from the National Bank of Ukraine, as of March 1, 2021, in terms of total assets (UAH 561.062 billion) PrivatBank ranked first among 73 banks operating in the country.
Minister of Finance Serhiy Marchenko criticized head of the Ministry of Health Maksym Stepanov for poor planning of measures to combat COVID-19, while admitting the possibility of increasing spending on medicine in the state budget-2021.
“He behaves like a character from ’12 Chairs’. ‘Money in the morning – chairs in the evening, money in the evening – chairs in the morning, but money in advance.’ That’s how Stepanov behaves. His task is to get as much of a budget as possible, taking advantage of the fact that we have a COVID, we have problems, we have people dying, and then, using this rhetoric, to solve those problems that are necessary to solve. I think this is absolutely wrong,” Marchenko said in an interview with lb.ua.
“We must first propose a plan, show a solution to the problem, and there was enough time for that, and then ask the finance minister or the government questions to search for funds. And now we have the approach – first money, and then I will fight COVID-19. It is impossible to put the question like that,” the minister said.
At the same time, the head of the Ministry of Finance pointed to the unspent funds of the Fund to Combat COVID-19 at the end of 2020.
“At the Cabinet of Ministers we often sort things out, and this is normal, because I have something to ask him, in particular, about the leftovers of last year. He collected money, and in the end we got leftovers that were not used,” Marchenko said.
Speaking about the possibility of correction of the state budget for 2021, he also said there is a possibility of increasing spending on medicine.
“There is a possibility of such a scenario, since there is a need to close several issues on medicine. We will discuss with the IMF and with other partners the possibility of minor adjustments to the budget,” Marchenko said.
The State Budget of Ukraine for 2021 provides for an increase in funding for medicine, education and science, as well as the security and defense sector, Ukrainian President Volodymyr Zelensky said.
“Firstly, this is money for medicine. Almost UAH 160 billion. It is the most during the years of Ukraine’s independence. … We have raised salaries for doctors by 30%, but we all understand that this is not enough, so we strive to continue increasing their salaries in 2021,” Zelensky said in his vlog posted on his official Telegram channel on Friday night.
We also plan to equip 210 ER departments and 450 new ambulances. Supplemental payments for doctors who fight COVID-19 will be continued.
Next year education and science will receive UAH 26 billion more, and in total almost UAH 170 billion will be allocated for their development. In particular, the salaries of educators will increase by 20%.
As for defense expenditures, the budget of the Ministry of Defense in 2017 amounted to UAH 69 billion, in 2018 – UAH 86 billion, in 2019 – UAH 102 billion, and in 2021 it will reach over UAH 117 billion.
In general, the budget for the security and defense sphere, including expenditures on intelligence, the State Border Guard Service and the State Emergency Service of Ukraine, amounted to more than UAH 267 billion.
Also, according to the president, starting from January 1 next year, the minimum wage will increase to UAH 6,000, and during the year it will increase to UAH 6,500.
The President thanked MPs from the Servant of the People party and other political forces for supporting the state budget and passing a number of other important laws. In particular, Zelensky noted the adoption by the Verkhovna Rada of a law on the restoration of the powers of the National Agency for Corruption Prevention, which were previously revoked by a decision of the Constitutional Court of Ukraine.
Skyrizon Aircraft, a Chinese private company, and Xinwei Technology Group listed on the Shanghai Stock Exchange under the terms of agreements with Ukroboronprom state concern will provide Ukraine’s aircraft manufacturing industry with grant financing in the amount of $100 million in case of obtaining permission from the Antimonopoly Committee of Ukraine (AMC) to purchase more than 50% of shares in PJSC Motor Sich (Zaporizhia), an informed source in the government has told Interfax-Ukraine.
“The receipt of these funds in the special fund is already provided for in Paragraph 9 of Article 11 of the law on the national budget of Ukraine for 2019: some UAH 2.8 billion at the exchange rate at the time of adoption of the state budget,” the source said.
He noted that this condition is one of the key in agreements between the Chinese investors and Ukroboronprom approved by the government together with the transfer to the Ukrainian state corporation of a blocking stake in the amount of more than 25% of the shares for the joint management of Motor Sich.
The source noted that this project on the development of aircraft production in Ukraine and the construction of semi knocked-down production in the Chinese city of Chongqing was launched in 2015 on the basis of cooperation agreements between Motor Sich, Skyrizon and Xinwei Group. Within its framework, the Ukrainian company in 2016 received preferential credit financing in the amount of $100 million, and in Chongqing the construction of an assembly plant has now begun.
The basic document for the project is the agreement on cooperation dated April 27, 2018 between Ukraine represented by Ukroboronprom and Skyrizon and Xinwei, which underwent an independent examination of British law by one of the world’s largest law firms, the source said.
