Tax police ‘accidental’ reform

UKRAINE - In Brief 15 Jan 2017 by Dmytro Boyarchuk

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In December 2016 parliament accidentally deprived powers of the tax police. A package of tax changes was under consideration, and by some mistake the tax police was cancelled. We may never know who was the author of this "mistake" but that’s what happened. The tax police was one of the key instruments of the discretionary application of power over businesses. "Nightmaring" entrepreneurs for the sake of political pressure or simply to take over their businesses was the main goal of this institution. A few numbers to understand the essence of the tax police: 85% of the criminal cases that the tax police started were closed due to absence of any crime, and only 7% of criminal cases from the tax police have been passed to the courts. When the tax police was cancelled we did not take this news seriously – too good to be true, a technical mistake that would be corrected promptly. But last week Finance Minister Oleksandr Danyliuk stated on his Facebook page that the tax police will not be resurrected. The Finance Minister came out with a proposal to replace the tax police with a new institution that will be based on different principles. In short, he suggested starting from scratch with a new state service, with absolutely new people recruited, functions revised and salaries increased to market level. For sure, this effort does not necessarily mean it will reach its goal. The tax police was a critical part of the system, and rent-seekers will invest heavily to get this institution back. But should it happen that Danyliuk wins this fight – it will be another landmark reform demonstrating real improvement in the business environment. Keep fingers crossed.