Budget revenues surged 24.1% y/y in March on VAT reimbursement delay

UKRAINE - In Brief 04 Apr 2014 by Dmytro Boyarchuk

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State collections in March suddenly surged up 24.1% y/y, the Treasury reported on April 3rd. In general, for the first quarter central budget revenues were reported 5.8% more than a year ago. At the same time the Treasury registered 35% decline in VAT reimbursement for the first three months. Though we do not have more detailed data for March fiscal performance, from this short message we see VAT reimbursement for exporters as the main reason of unexpected revenues’ increase. Still VAT is not the whole story – excluding VAT effect we still have a 7.7% y/y increase in state collections through March. What it might be? Unfortunately, we do not know. In light of circulating rumors it could be anything from continued practice of advance payments till some healthy tendency with closing tax evasion loopholes. In fact, after appointing people from business to be in charge of tax collections (Igor Bilous, former investment banker, was appointed to lead Tax Administration, Vitaliy Naumenko, former auditor from Big4, was appointed to lead Customs Service) we have some ground to anticipate ‘shadow’ decreasing gradually. Still rumors from the field are not very positive so far – mid-level state officials are resisting severely to any changes and many corrupt schemes continue working. In any case, the most dramatic changes in taxation and, subsequently, tax collections will be observed from April after the revised budget law and anti-crisis law were enacted. Recall, the revised revenues’ target outlines 10.0% y/y state collections increase and we believe this target is quite feasible in light of hryvnia decline, inflation speed up and taxes increase. What more, after approval of re...