Ukraine 2M18 budget revenue drops 0.5%, 6% below plan

Ukraine’s state budget revenue dropped 0.5% yoy to UAH
115.5 bln in 2M18, which is 5.8% below plan, the the State Treasury reported on
March 2. A 10.7% yoy tax revenue drop to UAH 70.8 bln – amid VAT reimbursement
growth of 38.5% yoy to UAH 23.6 bln – resulted in a 24.2% yoy net tax revenue
fall to UAH 47.2 bln. At the same time, custom revenue surged 23.1% yoy to UAH
49.7 bln.

For 2M18, the collections of Ukraine’s State Fiscal
Service were 6.4% below plan as net tax revenue dropped 16.0% below the plan
while customs revenue outperformed the plan by 5.2%.

Local budget revenue swelled 18.1% yoy to UAH 34.3 bln
in 2M18 and exceeded the plan by 1.8%. Social payments (personal income tax and
Pension Fund contributions paid by employers) jumped 31.1% yoy to UAH 32.3 bln.

Evgeniya Akhtyrko: The
significant drop in tax revenues, amid high VAT reimbursement, looks worrisome
as some political forces could use this situation as a pretext for halting VAT
reimbursement or for inventing some surrogates for direct cash reimbursement
(e.g. VAT bonds). Should this happen,
exporters’ revenue will decline, resulting in smaller foreign currency inflow
to the country.

To improve the situation with tax collection, the
tax authorities might also increase pressure on businesses by using more
methods of “manual” collection instead of an automatic regime. Hopefully,
improved economic growth in the following months will boost revenues and
prevent the government from resorting to bad practices.