At a time when state coffers are starving for money to fund Ukraine\u2019s survival, illegal smuggling is costing the country billions of dollars a year in lost tax payments.<\/p>\n
Through bribery or lying, smugglers avoid an estimated $2.4 to $3 billion in customs payments each year as they smuggle everything from cigarettes and iPhones to perfume and food across the border undeclared or mislabeled.<\/p>\n
Last year, the State Customs Service audited 9,000 cases of declared \u201chumanitarian aid\u201d entering the country and found that around a third were probably other goods falsely labeled to avoid customs fees.<\/p>\n
Major business associations had also championed this bill, pressuring the government to raise revenue from illegal markets after the government moved to raise taxes on legal businesses.<\/p>\n
With Ukraine facing a $35 billion budget deficit next year, customs reform was an attempt to mitigate the unpopularity of the country\u2019s first wartime tax hike.<\/p>\n
\u201cI would say that this situation with the budget was one of the political enablers for this reform to actually be voted on. Because there is huge pressure from people and from businesses to actually not only raise tax rates but to work on more even tax compliance and on leveling the field,\u201d Yurii Gaidai, senior economist at the Kyiv-based Center for Economic Strategy (CES), told the Kyiv Independent last month.<\/p>\n
\n“There is huge pressure from people and from businesses to actually not only raise tax rates but to work on more even tax compliance and on leveling the field.”<\/p>\n<\/blockquote>\n<\/div>\n
\u201cThe big business pushback helped put these new (custom) reforms into play,\u201d he said.<\/p>\n
Customs reform has long been a goal of Ukraine\u2019s business community. Before the full-scale invasion, a 2019 survey by the American Chamber of Commerce in Ukraine (AmCham) found that 76% of its members believed customs reform should be the top priority for Ukraine\u2019s parliament and government.<\/p>\n
Only a first step<\/h2>\n
After the president signs the law, it will take time to see results. \u00a0The law provides two months for a selection committee to be formed, and up to three years for the re-certifications to be carried out.<\/p>\n
\u201cEven if it goes as fast and well as possible, I would not expect to have any fiscal results in the coming budget year,\u201d said Gaidai from CES.<\/p>\n
\u201cI would even say that if it\u2019s really done properly, we could expect some decrease in tax revenues at first,\u201d Gaidai said. \u201cBecause every time the previous government strived to reform the customs service, they faced sabotage from corrupt people there.\u201d<\/p>\n