Individual Corruption

According to Transparency International's Global Corruption Barometer 2010, only a small part of the households surveyed reports to have paid a bribe to tax authorities in 2009. In the first half of 2007, 245 tax officers were brought in front of administrative authorities and 20 of them laid off for abusing their positions. Also, the Attorney General filed 857 lawsuits on VAT Administration malpractices, and 457 of these were won.

Business Corruption

According to the World Economic Forum Global Competitiveness Report 2011-2012, tax regulations are considered among the most problematic factors for conducting business in Ukraine. Similarly, Global Integrity 2009 reports that tax laws are seldom enforced uniformly and without discrimination, and some groups consistently avoid paying taxes due to their connections. Moreover, according to the report, tax officials regularly demand bribes from companies. Also, the EBRD & World Bank BEEPS Ukraine 2008 reports that bribery connected to taxes and tax collection is not uncommon in Ukraine, and companies sometimes 'negotiate' a fine with tax officials if small violations of tax laws are discovered during audits. 

According to the World Bank & IFC Enterprise Surveys 2008, tax administration tops the list of perceived impediments to business operations in Ukraine. Investors complain that the State Tax Administration selectively enforces tax policy and that it uses its investigative authority to advance favoured political or business interests.

According to the USAID & MSI Corruption Assessment 2006, paying taxes is considered burdensome, contradictory and complicated by companies, and legislation creates possibilities for abuses by making available a wide range of fines to be imposed for the same offence. It is also reported that in investigating tax evasion, the tax police have the right to occupy a company's office and seize documents, and that this right has been abused to obtain political and economic advantages. In some instances, reports say that tax privileges are granted in return for kickbacks to public officials.

VAT refunds are also highly problematic. According to the US Department of State 2008, exporting companies are expected to pay bribes to tax officials between 5 and 30 percent of VAT refunds in order to get refunds. In 2008, the process for obtaining a VAT refund took between 3 and 18 months for foreign companies. Furthermore, companies report a very uneven pattern of refunds, where some companies are refunded much faster than others. According to the US Department of State 2009, Ukraine's VAT regime suffers from poor management, non-transparency and corruption, while delays in refunds have become an important cost factor for many companies.

Political Corruption

The State Tax Administration oversees all taxes in Ukraine. According to Global Integrity 2009, tax laws and regulations are not always clear, are frequently changed and can be contradictory. This results in a high level of tax evasion, and a large informal economy (estimated by the World Bank as 52.2% of GDP). According to the report, it is not uncommon for some groups, most notably well-connected individuals or companies, to consistently avoid paying taxes due to corruption and connections. The regulatory and institutional framework for taxation thus remains a high risk area for corruption.

Large-scale corruption is suspected to have occurred in a VAT refund scam, which allegedly amounted to USD 1 billion in 2006. This scam involved kickbacks to tax officials in the range of 30-50% of the refunded VAT.

At the end of February 2009, Ukraine's national intelligence agency, SBU, arrested a senior tax administration official for allowing some 13.7 billion cubic metres of natural gas of disputed title and held in Ukrainian reservoirs and pipelines to be marketed in Ukraine, according to a 2009 article by All Headline News.

The most recent high-level corruption investigation related to taxes has been launched against former Prime Minister Yulia Timoshenko. In October 2011, Tymoshenko was found guilty of abuse of office and sentenced to seven years in prison, according to a 2011 article by Euronews. However, in addition to this, an old criminal case on tax evasion charges and embezzlement of state funds was re-opened against Tymoshenko, according to the same article. This resulted in a court order from December 2011 to indefinitely arrest Tymoshenko, given the charges of tax evasion and embezzlement of government funds between 1996 and 2000. Timoshenko has claimed that the court actions are politically-motivated.

Frequency

The World Bank & IFC: Doing Business 2012:
- A medium-sized company can expect to make 135 payments (several times the regional average) and spend 657 hours a year (more than twice the regional average) managing the administrative burden of paying taxes.

- The total tax rate as percent of profit is 57%.

- In connection with the above figures, Ukraine is among the worst performing countries in the world in relation to paying taxes.

Transparency International: Global Corruption Barometer 2010:
- 10.4% of households who had contact with tax revenue services throughout 2009 report to have paid a bribe.

EBRD & World Bank: BEEPS Ukraine 2008:
- 26% of the companies surveyed report that bribery in connection with taxes and tax collection is widespread, a figure, which is much higher than the regional average.

- 65% of the companies surveyed reported that tax administration represents an obstacle to doing business in Ukraine.

- On average, the surveyed companies were inspected by tax authorities roughly around 6 times a year.

The World Bank & IFC: Enterprise Surveys 2008:
- 28% of the companies surveyed expected to give gifts in meetings with tax inspectors.

- 55% of the companies surveyed identified tax administration as a major constraint.

- The number of meetings with tax inspectors was 3.8 times a year on average.