Page 33 - UKRRptJan21

emergency spending is needed. In a country with notorious corruption, weak institutions and a government propensity for populism, increased budget expenditures are not likely to create an additional safety net for a vulnerable public and/or new economic incentives. Instead, it is likely to create new areas of corruption and undermine fiscal discipline.
6.1.1 ​Budget dynamics - results
Ukraine's state budget revenue rose 7.7% y/y to UAH1,076bn in 2020​, outperforming plan by 1.5%, the State Treasury provisionally reported on January 4. Net tax revenue jumped 11.0% y/y to UAH507bn (10.7% above plan) amid 6.8% y/y growth in gross tax revenue and a 5.8% y/y fall in VAT reimbursement. Customs revenue dropped 7.2% y/y to UAH297bn (8.8% below plan).
Local budgets' fiscal revenue improved 5.4% y/y to UAH298bn in 2020, which is 1.6% below plan. Social payments (pension and other social fund contributions paid by employers) advanced 7.6% y/y to UAH294bn.
In December alone, state budget revenue surged 32.7% y/y to UAH131bn, which is 16.6% above plan. The revenue surge in December was driven by the special fund, which swelled by more than five times y/y to UAH59mn. Meanwhile, net tax revenue in December dropped 25.4% y/y to UAH34.7 amid a 12.9% y/y decline in gross tax revenue and 46.5% y/y growth in VAT reimbursement. Customs revenue increased 7.5% y/y to UAH32.96bn (23.5% above plan).
Evgeniya Akhtyrko: Apparently, the December budget revenues involved some accounting tricks, which created a healthy picture that camouflaged existing problems with basic revenue sources (i.e. tax and customs collections). Meanwhile, the swelling special fund is not an achievement because it includes budget financing for special government projects.
In addition, December’s sudden surge in VAT reimbursement to importers also deserves special attention. It might be the result of underpaid reimbursements in previous months, which accumulated but had to be paid at the year end to avoid discontentment among taxpayers.
That said, December’s budget results only confirm our suspicion that the alleged improvement of budget collections in 2H20 was mostly the result of employing “points of leverage”, rather than consistent efforts in reforming tax administration, reducing the shadow economy and fighting corruption.
The ICU Investment Group estimates the financing of the state budget deficit in 2020 at UAH200bn ($2.9bn) compared with the planned UAH298.4bn, ​senior financial analyst at the ICU Investment Group Taras Kotovych was quoted as saying by Interfax Ukraine on December 16.
"There is a problem with attracting funds. In January-November, the budget deficit amounted to UAH117bn, and not up to UAH200bn, which [it] could have been, precisely because of the poor execution of budget expenditures," he said.
According to Kotovych, the planned 2020 deficit is not being met, in particular, healthcare and economic activities were financed by only 60%, which is due to
33​ UKRAINE Country Report​ January 2021 ​ ​www.intellinews.com