Heads of tax and customs services dismissed by cabinet

Ukraine’s cabinet decided at an Apr. 24 meeting to dismiss
the head of the State Customs Service, Max Nefyodov, and three of his deputies.
It also resolved to dismiss the head of the State Tax Service, Serhiy Verlanov,
and his deputy. The personnel changes “over long overdue”, Finance Minister
Serhiy Marchenko said in an announcement on the cabinet website. “For a long
time, a critical mass of unfulfilled hopes has existed in society” regarding
the activity of customs and tax services, said Marchenko, who himself was
appointed just a month ago. “Even in the pro-crisis period, the leadership of
these services has proven incapable of fulfilling the tasks placed on it. In
today’s conditions, their occupying these posts was a risk to ensuring
financial stability. They lost the trust of the public and had to leave.” The
replacements are acting customs service head Ihor Muratov, and acting tax
service head Mykhaylo Tytarchuk, Marchenko said.

Prime Minister Denys Shmyhal cited poor revenue
collections as among the reasons for dismissing Nefyodov and Verlanov in an
Apr. 27 Facebook post. “The 2019 budget showed among the worst revenue
indicators in recent years. We saw that the situation in 2020 didn’t improve,
and not only because of the coronavirus,” he wrote. At the same time, Shmyhal
acknowledged that changing the heads won’t address the problem, which is why he
is pursuing “decisive institutional changes.” The cabinet is currently forming
teams “that can that fulfill this work in an extremely complicated time,” he
said. The dismissals were announced the same day a temporary parliamentary
investigative commission was formed to look into claims by former Finance
Minister Ihor Umanskiy that ongoing corruption in these services cost the 2019
budget at least UAH 120 bln. Shmyhal said he supports the investigators and called
on them to be transparent in their work.

In response to the dismissals, Nefyodov said he has no
warning about them, nor had many ministers known about them at the Apr. 24
cabinet meeting. In defense of his work, he cited a significant rise in reported
imports of contraband-prone goods in the first quarter, in an interview with
the finance.liga.net news site published on Apr. 25. In particular, mobile
phone imports surged 71% yoy and clothing imports rose 43% yoy, in spite of the
March coronavirus quarantine. From his end, Verlanov told an Apr. 24 television
talk show the dismissals are entirely political and have nothing to do with
effectiveness. In 2019, the tax service fulfilled its annual revenue plan for
the first time in eight years, and fulfilled its plan for excise duties on
alcohol products for the first time in four years, he said.

Zenon Zawada: If Shmyhal
is genuinely interested in “decisive institutional changes” (as is all of the
investment community), then we don’t see any individuals, or groups of
individuals, in government capable of implementing them at this moment. The tax
and customs services are so plagued by corruption that they would require
radical measures – with harsh and intense battles on many fronts – that current
key officials (particularly President Zelensky and President’s Office Head
Andriy Yermak) have shown they are not interested in taking up themselves, let
alone being capable in pursuing.

It’s possible that the heads of these two critical
state services are being cleared for appointments by Mikheil Saakashvili, the
former Georgian president who is still gathering votes among MPs to elect him
as the reforms deputy prime minister. He is certainly the type of politician
who has shown himself capable of enacting dramatic widescale reforms and waging
political battles with those opposed. Unlike Zelensky and Yermak, Saakashvili
genuinely enjoys the political game and thrives on adversity.

If these positions are not being cleared for arrival
of Saakashvili, who is the only persona in the current Ukrainian landscape
remotely capable of “decisive institutional changes,” then we expect nothing
positive from these dismissals, as Shmyhal himself acknowledged. If anything,
it reaffirms to the public that anyone going to serve in the Zelensky
administration can expect to be in their post for no more than six months, a
message that merely encourages corruption rather than reduces it.