World Bank willing to help Ukraine strike balance on taxes - vice president

MOSCOW. March 24 (Interfax) - In pursuing a tax reform, Ukraine should strike a balance between competing objectives, namely mobilizing critical resources for the state budget and providing incentives for economic growth, World Bank Vice President for Europe and Central Asia Anna Bjerde said.

The World Bank believes both objectives can be attained, which is a question of balance and the right succession of steps, Ukrainian media quoted Bjerde as saying at the Ukrainian Tax Reform and Anti-Corruption Summit in Kiev.

Ukraine has been reforming its tax system since 2015, but the process has been complicated by the current crisis, and a balance between financial stability, improvement of social standards, and economic stimulation has not yet been fully achieved, Bjerde said.

To attain this objective, it is important for Ukraine to be more efficient in administering taxes, pursue anticorruption measures, and build confidence, including through promoting the rule of law and stability, she said.

Bjerde also highlighted the importance of the broadest possible taxable base and the elimination of tax breaks as a precondition for possibly reducing tax rates.

As an example, Bjerde cited New Zealand, which has a very broad taxable base and 15% VAT.

Ukraine should set clear timeframes for tax breaks and monitor them to preserve efficiency and equitability, Bjerde said. She also suggested that VAT exemption is often not a very efficient mechanism.

The World Bank has extensive experience in this field and may help Ukraine achieve the necessary balance, she said.

As reported earlier, Ukraine and the International Monetary Fund (IMF) reached a staff-level agreement on a new four-year Extended Fund Facility (EFF) in the amount of about $15.6 billion. The program should be divided into two stages, the first one aimed at maintaining stability and designed for 12 to 18 months, during which Ukraine would avoid new measures that might disrupt tax collection.

The second stage implies substantial structural reforms and would be aimed at ensuring economic growth and European integration. The IMF suggested that, at this stage, the Ukrainian tax and budget policy would focus on critical structural reforms to guarantee midterm revenues through implementing a national revenue strategy along with enhancing the management of state finances and reforming the management of state investment to uphold post-crisis recovery.