Ukraine budget revenue rises 8% yoy in 2020

Ukraine’s state budget revenue rose 7.7% yoy to UAH
1,076 bln in 2020, outperforming plan by 1.5%, the State Treasury provisionally
reported on Jan. 4. Net tax revenue jumped 11.0% yoy to UAH 507 bln (10.7%
above plan) amid 6.8% yoy growth in gross tax revenue and a 5.8% yoy fall in
VAT reimbursement. Customs revenue dropped 7.2% yoy to UAH 297 bln (8.8% below
plan).

Local budgets’ fiscal revenue improved 5.4% yoy to UAH
298 bln in 2020, which is 1.6% below plan. Social payments (pension and other
social fund contributions paid by employers) advanced 7.6% yoy to UAH 294 bln.

In December alone, state budget revenue surged 32.7%
yoy to UAH 131 bln, which is 16.6% above plan. The revenue surge in December
was driven by the special fund, which swelled by more than five times yoy to
UAH 59 mln. Meanwhile, net tax revenue in December dropped 25.4% yoy to UAH
34.7 amid a 12.9% yoy decline in gross tax revenue and 46.5% yoy growth in VAT
reimbursement. Customs revenue increased 7.5% yoy to UAH 32.96 bln (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.