During the 90's overwhelmingly, situation could be described as full caos. In a young new state, organization and control of Tax Dpt. and inspection of fullfillment of obligations by companies and private persons was fully conditioned by a system of corruption which did not help to build up a reasonable Taxing System which could be used to cover expenses to be covered by Goverment, mainly in education, health and pensions.
Country had a very unbalanced budget as expenses were much higher than income generated by taxes. Besides, many state companies were operating, theoretically, in losses, before being dismantled and privatize for lower price that its actual real market price.
First decade of the new century, did bring and increase on income due to a more effective control on Taxing System. Anyway, still far from what could be desirable in a country which pretends to be part of the 1st world. Periodically, -privatization of main assest of the State ( p.e. Krivoi Rig Steal Factory ), followed by hints of corruption as selling prices, again, were lower than real market value of these assets-, helped to balance the Nartional Budget to hide the real situation of the State finances. Just postponing problems.
Finally, last two years, due to decrease on income because of economical crisis, ukranian politicians and economists, have to approach international institutions, as IMF, asking for credits to be able to pay the most urgent payments they have to execute to pay state expenses, as salaries as pensions etc.. At that point, they do realize that international financial community is changing its attitude towards countries like Ukraine. The experience of 20 years waiting for changes which would favour investment, spread state corruption and lack of trust on local politicians means that things will be very different from now on.
Ukraine faces a new situation. Either creates a system where all companies pay taxes and state has an income which will allow them to cover state budget expenses or faces a situation, where increase mass of local currency, will bring a very dangerous situation with a non-controled inflation and new serious devaluation of local currency ( UAH ). That's today reality. Foreign investment, will not be able to compensate in any case, actual situation. Either Tax Dpt. starts to operate properly collecting taxes from ALL companies and private person, duties from customs are paid and not eluded ( today's estimation is that aproximately 90% of goods are smuggled into the market not paying customduties ) or the country faces a financial collapse.
The big question is: how can Ukraine be able to have a reliable tax collection based in a stable and acceptable legislation for ukranian and foreig companies operating in the country ? How can corruption be eliminated in State organizations assuring state employees a decent salary to live ?
This is one of the main challenges that faces the new Ukranian Goverment. In case, it does not succeed, Ukraine will enter a very dangerous scenario...depending fully on aid from foreing institutions and countries, which will jeopardize its politicial autonomy in the world arena.
We see some attemps on these days from Ukranian goverment to tackle this problem and create a new Tax Code. Proposals made from goverment are facing strong opposition from many business sectors and private persons. Situation will be clarified during this spring. Country can not wait more to balance its national budget. Anyway, politicians have not to forget, that future growth will also depend on the friendly enviroment created for companies which are asking for a lower taxing, reduction of burocratical controls and absence of corruption.
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