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Turn out your pockets: What are risks for Ukrainians from disclosure of banking secrets?

Author : Iryna Shostak

Source : 112 Ukraine

We want to open the banking secrets to the tax authorities. The corresponding bill No. 4073 was registered in the parliament by the Servant of the People party MP Daria Volodina. Experts note that such actions can lead to irreparable consequences, one of which is an increase in cases of fraud
23:17, 15 December 2020

Open source

Banking secrecy is information about the activities and financial condition of the client, which became known to the bank (or to third parties when providing bank services) in the process of servicing the client and relations with him and the disclosure of which may cause material or moral damage to the client.

Today, banks automatically notify the State Tax Service (STS) about opening an account - the only available type of information related to bank secrecy, but they do not say how much money is on it and what transactions are being carried out. The tax office can get access to this information only with the opening of a criminal case by the decision of the investigating judge - only if the law enforcement agencies have irrefutable evidence that your income is not entirely legal and that you, say, come under the control of funds for money laundering and obtaining by criminal means.

Several initiatives have recently been registered in the Rada that aim to facilitate this access. For example, according to bill No. 4073, the tax office can get unhindered access to bank secrecy information only upon written request. That is, if it is adopted in the near future, tax authorities will be able to access information of any level, even if, for example, you transferred money to a beekeeper for a jar of honey that he sent you by delivery. The bill will allow the tax authorities to identify and fine such "businessmen."

The author of the initiative notes in an explanatory note that the current state of affairs (data on transactions are provided to tax authorities only by a court decision) makes it difficult to identify taxpayers in time, determine the amount of tax liabilities, and levy fines and penalties for violating tax laws. And ahead of the questions of Ukrainians regarding risks, the initiators note that the provision of unhindered access to such information neutralizes them both by the economic effect of increasing revenues to the state treasury, and by certain current legislative acts - warnings to ensure the non-disclosure of both tax information and information containing bank secrets.

That is, officials assure that Ukrainians should not worry, moreover, the discovery of bank secrets has long become a financial trend in all economically developed countries. Nevertheless, financiers disagree with such a statement, noting that with the discovery of banking secrets, Ukrainians will only have more problems. This is especially true for entrepreneurs and workers.

What is the threat of opening bank secrets to labor migrants?

Do you work abroad and send funds to relatives? Get ready, we are coming to you - this is how such an initiative looks like, which, according to economic expert Oleg Pendzin, was created in order to legally look into the pockets of Ukrainians and took a lot of live funds into the state budget.

"If the transfer is carried out through accounts, the financial monitoring bank has no claims, because there is a clear origin of this money. The tax authorities cannot in any way determine the person who received money from a worker from abroad, because the money was received legally. Here, if you open bank secrets, the tax authorities have the opportunity to round up such people and impose additional taxes on them, ”the expert explains.

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The first thing that should be explained is that citizens of Ukraine working abroad must declare their income at home and pay taxes on them - a military duty of 1.5% and a personal income tax (PIT) of 18%. Nevertheless, the taxation of workers has its own peculiarities.

For example, if the income tax from a Ukrainian has already been collected in the country of earnings, and the country itself has an agreement with Ukraine "On the avoidance of double taxation", then in Ukraine the taxpayer is exempted from paying personal income tax in the amount already contributed to the foreign treasury (such agreements we have more than with 70 states - Germany, Poland, Czech Republic, and others). But it's not that simple.

Even if you paid taxes from this money abroad and sent it here, then in Ukraine you will need to prove that we have signed an agreement with that country on the avoidance of double taxation, submit the taxes paid at the place of receipt, and then prove that the taxes that you paid there are higher than taxes in Ukraine.

“In this agreement on the avoidance of double taxation, Ukraine recognizes taxes paid in other countries if they are higher than those that must be paid in Ukraine,” the economic expert explains.

That is, if, for example, you paid 5% for the legalization of these funds, and our personal income tax is 18%, then the tax authorities will not recognize these taxes, and you will have to pay the difference.

Funds transferred by the worker through payment systems or to the bank accounts of close relatives are not taxed. But if the recipient is not in kinship with the employee, then he also needs to report on the income received and pay fees. Otherwise - a fine. Failure to pay tax is punishable in addition to it by a 25% fine on the tax amount. In the case of repeated violation, the penalty increases to 50%.

The fact is that, according to the National Bank, last year Ukraine received $ 12 billion from abroad, of which only UAH 11 billion was declared. Moreover, the regulator "sees" only funds transferred through money transfer systems such as Western Union or MoneyGram, therefore, it is difficult to say what the exact amount may be - today the tax authorities do not have an effective method of control over foreign income, nor does it have the opportunity collect taxes from them.

"We want to get a tranche of $ 1.2 billion from the International Monetary Fund, and this is a loan, and there is so much money to which the tax authorities have no access (the money that came to Ukraine, and there is no need to return it). Of course, they generate a bunch of things in order to get into the accounts of those people and tax that money additionally, they will not just look at them, but they will immediately write you demand, order for the amount of personal income tax - 18% + 1,5% of the military fee," says Oleg Pendzin.

According to economist Oleksiy Kushch, such changes should be considered in a complex way - partial disclosure of bank secrets is an integral part of fiscalization, the so-called capital amnesty. It is planned to oblige every Ukrainian to annually report on his income and property status, fill out declarations and submit to the tax service, and to do this regardless of whether a person works at one place of work or at several. In terms of taxes, the growth of property status will be monitored and compared with the declared income.

"If, for example, a person's property status has increased by 1 million over the year, and income is declared by 500 thousand, then, accordingly, the difference of 500 thousand will be taxed additionally," the expert explains.

Therefore, in order to implement such plans, it is necessary to open access to the movement of funds in people's accounts, so that the declaration of income and property status can be checked.

Another example: you work in Poland, accumulated 50 thousand dollars over several years, came to Ukraine, and bought an apartment - now you are out of sight of the tax service. If such an integrated approach is introduced (reporting on property status, access to bank secrets), then the state will know exactly how much money has been transferred from abroad, what taxes have been paid on them. In fact, a person will be taxed in the future.

The train of thought of officials is understandable, but why then does not everyone approve of the disclosure of banking secrets?

Why is the opening of banking secrets in Ukraine a risk?

“In my opinion, amendments to the relevant legislation (granting tax authorities free access to bank secrets without court decisions) is unjustified in Ukraine today. Because we perfectly understand that any secret in Ukraine, unfortunately, is very poorly protected. And in fact, a very large number of people have unlimited access to it," says lawyer Rostislav Kravets.

According to the expert, the adoption of such initiatives may lead to unlawful interference with the rights of citizens on the part of state bodies: extortion of bribes, provision of certain explanations, persecution. Also, access to such information can be used by the current government to try to interfere in the activities of an enterprise, in a certain way to influence a particular politician, his relatives, loved ones, his business.

But the biggest evil that Ukrainians can suffer from is swindlers.

"We have a very large number of cases when judges' decisions, executive documents are forged and huge money is written off from the accounts of citizens. And here, in fact, the fraudsters will have completely all the information on which accounts what funds are, and it is these funds, under these accounts and decisions, executive documents will be forged in order to steal funds, payment orders, etc.", explains the lawyer.

It is judicial control that makes it possible (albeit insignificantly), in a certain way, to limit the desire of state bodies to obtain bank secrets without reasonable explanations.

Moreover, in the opinion of Rostislav Kravets, such a bill may in the future be recognized as unconstitutional, because this has already happened - if we recall the laws on financial monitoring, verification, when they tried to give the Ministry of Finance unlimited powers to access bank secrets.

"The draft law, as always, does not provide for control, the responsibility of persons receiving information, grounds for obtaining it. In fact, the state that opens this banking secret will in no way be responsible for the preservation of this information and for the funds of citizens that will disappear from these accounts", the expert adds.

Returning to the thesis that such initiatives have long been taking place in developed Western countries, it should be noted that it is not appropriate to adopt the foreign model in this case. After all, officials are trying to pull out a certain tool, not understanding in general how it works.

First, in order for such solutions to work, our financial system must correspond to the financial systems of economically developed countries (it is necessary to achieve high standards of economic development and population incomes), which we cannot say today.

"Now this is an attempt to put our financial system, relatively speaking, into the model of Swiss banking," explains Oleksiy Kushch.

Yes, fiscalization and such control by the state is normal in the world, but for this, countries first built their economies, achieved high social standards, and only then introduced such control.

"You can't put a cart in front of a horse - first the country must achieve certain high standards of economic development, and then do what rich countries do," the economist adds, pointing out that Ukraine should focus on countries that are similar to us in terms of development (Asian countries, countries of the Middle East, some African countries, where the conditions for attracting money to the financial system from the population, investors are now quite simple, and the state does not pay attention to where this money comes from and does not interfere in these processes).

Secondly, do we trust the tax authorities, do we have 100% protection of personal data today? Again, if we are equal to the economically more developed countries, then we must understand that in such countries there is a responsibility of the state for the preservation of information, government bodies do not abuse it, do not use it in the interests of political speculation, and if there are some misunderstandings - compensate for losses without additional decisions of the judges.

Here, in order to receive a refund, you need to go through several circles of hell.

"You will be sent to court, where you will be suing for 5 years, and then they will say that there is no money in the budget, so you will be asked to wait in line for another 25-30 years until the state can reimburse you that money. Therefore, I think that it is impossible to compare these systems due to the fact that the system of responsibility of state bodies in Ukraine is practically absent," says lawyer Rostislav Kravets.

It is clear that if the state provides high-quality administrative services, a high level of social protection and corruption is absent or at least minimized - the population gives money because they feel the quality. And if a person gives money and does not see this quality, he perceives the state as a nomadic state that has robbed and moved on.

"This is all similar to the ancient Russian system of tribute (polyudye), when the princes once a year left Kyiv with a squad and traveled around neighboring tribes, taking furs and honey. For Prince Igor, who traveled like this several times, it ended badly," explains Olexiy Kushch.

Therefore, today Ukrainians perceive such actions of the state as that of Prince Igor, who arrived for the third time in the last year, although he should have come once. In order to change this, officials need to disassemble and analyze the premium supermarket model: in order to get money from the buyer, you need to offer him a quality product. After all, having received unsatisfactory service, a person will no longer return to this supermarket.

For better assimilation, officials can read one of the history books and remind themselves what happened to that Prince Igor, who had no sense of proportion.

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