Page 32 - UKRRptDec21

the state budget of Ukraine will be about UAH115bn. To finance such a deficit and the planned repayment of the state debt (UAH64.4bn), the Ministry of Finance will need to borrow UAH180bn over the last two months of the year, or an average of UAH90bn per month. At the same time, in January-October, the average monthly borrowing amounted to about UAH40bn, Marchak notes.
6.1.2 Budget dynamics - specific issues...
The Ukrainian budget will lose up to UAH150bn due to the payment of salaries in the grey sector. The research of the Institute of Social and Economic Transformation said that in 2020, shadow salaries caused enormous losses to the budget of UAH110-150bn. ($5.7bn). The institute said that some budget losses have increased due to shadow wages, smuggling, and corruption at the border. At the same time, abuses through offshore and tax "twists", on the contrary, have decreased. Salaries pushed the four-year "leader", smuggling and violating customs rules, to the second place. Their losses amounted to about UAH70-120bn ($4.55bn) in 2021, while the volume of these schemes has increased over the past year.
Center for Social and Economic Research: Ukraine loses up to $17bn per year to tax avoidance. A new study by the Center for Social and Economic Research found that the Ukrainian budget loses out on $10-17bn each year due to tax optimization and evasion schemes. Additional payments made outside of one’s official salary, commonly referred to as payments “in envelopes,” are the top way to evade taxes. Each year, up to $11bn in additional payments are paid in envelopes, causing budget losses of up to $5.8bn. Smuggling is in second place, causing losses of up to $4.6bn. Offshore schemes, practiced by companies and high net-worth Ukrainians, are in third place, accounting for losses of up to $1.3bn.
Increase in the Tax Burden on Iron Ore Mining. The Ukraine Parliament adopted Tax law No5600 which increases the tax burden on iron ore mining. Amendment No97, which sought to reduce taxes, was rejected in the VR despite previous support from the committee. In addition to changing the rental rates for ore mining, the bill amends the taxation system of farmers, real estate sales, environmental tax, and excise tax. No5600 allows the collection of rent from the market value of ore with a higher ore content, namely the index IODEX 62% FE CFR China, calculated by the news agency Platts. In this case, the higher this market value - the higher the rental rate, reported epravda.
6.1.3 Budget dynamics - funding
President Volodymyr Zelenskiy's government has secured the long-awaited new IMF loan tranche of nearly $700mn as well as the extension of its $5bn stand-by program through June 2022 on November 23. The Washington-based organization said on November 22 that the program is to help Ukraine address the effects of Covid-19 shock and continue its economic recovery. The IMF had given Ukraine, one of Europe’s poorest countries, a loan deal last year as the country struggled through recession due to the coronavirus pandemic. But the loan disbursal has stalled due to concerns about reform progress and the independence of the central bank. The latest agreement is a boost for Zelenskiy’s government struggling to meet reform targets set by the lender, such as strengthening the anti-corruption
32 UKRAINE Country Report December 2021 www.intellinews.com