|There is no single list of all trends, but the most relevant ones were identified.
1) Eurointegration. Ukraine signed and ratified the Association Agreement Between the European Union and Its Member States, of the One Part, and Ukraine, of the Other Part (hereinafter — the Association Agreement) and has an aim to join the European Union. Thus, Ukraine has to reform some fields of legal regulation and provide appropriate level of its fulfillment. One of such fields is taxation, especially tax control.
Let’s analyze relevant provisions of the Association Agreement concerning taxation, tax control, SMEs, tax administration.
Firstly, in accordance with art. 378 of the Association Agreement it is defined that «[t]he Parties shall develop and strengthen their cooperation on industrial and enterprise policy, thereby improving the business environment … with particular emphasis on … SMEs (highlighted)… Enhanced cooperation should improve the administrative and regulatory framework for both Ukrainian and EU businesses operating in Ukraine and the EU, and should be based on the EU’s SME and industrial policies, taking into account internationally recognised principles and practices in this field (highlighed)» . In order to achieve these objectives article 379 provides that «the Parties shall cooperate in order to … (a) implement strategies for SME (highlighed) development, based on the principles of the European Charter for Small Enterprises, and monitor the implementation process through annual reporting and dialogue. This cooperation will also include a focus on micro— (highlighed) and craft enterprises, which are extremely important for both the EU and Ukrainian economies; (b) create better framework conditions, via the exchange of information and good practice … (c) simplify and rationalise regulations and regulatory practice, with specific focus on exchange of good practice as regards regulatory techniques, including the EU’s principles …» .
In other articles of the Association Agreement SMEs are also mentioned concerning the definite context.
|Art. 76 that Ukraine and the EU «agree that their respective trade and customs legislation, as a matter of principle, shall be stable and comprehensive, and that provisions and procedures shall be proportionate, transparent, predictable, non-discriminatory, impartial and applied uniformly and effectively and shall … (f) aim at reducing costs and increasing predictability for economic operators, including small and medium-sized companies (highlighted) … In order to improve working methods, as well as to ensure non-discrimination, transparency, efficiency, integrity and accountability of operations, the Parties shall … (c) provide effective, prompt and non-discriminatory procedures guaranteeing the right of appeal against customs’ and other agencies’ administrative actions, rulings and decisions affecting the goods submitted to customs. Such procedures for appeal shall be easily accessible, including to small or medium-sized enterprises (highlighted) and any costs shall be reasonable and commensurate with costs in providing for appeals …» .
Article 282 defines that «[c]ognisant of the impact which their respective regulatory environment may have on trade between them, the Parties shall establish and maintain an effective and predictable regulatory environment for economic operators (highlighted) doing business in their territory, especially small ones (highlighted), due account being taken of the requirements of legal certainty and proportionality» . In this context article 1, point 12 of the Commission Regulation No 2454/93 provides that “[e]conomic operator means: a person who, in the course of his business, is involved in activities covered by customs legislation” . Article 4(1) of the Council Regulation (EEC) No 2913/92 defines that a «‘Person’ means: — a natural person, — a legal person, — where the possibility is provided for under the rules in force, an association of persons recognized as having the capacity to perform legal acts but lacking the legal status of a legal person» .
Taxation is not mentioned directly concerning SMEs. Nevertheless, the Association Agreement mentions words «tax» 44 times and «taxation» 17 times. The most relevant are the following.
Article 127(2) in the third paragraph provides that «[e]ach Party shall make its best endeavours to ensure that internationally agreed standards for regulation and supervision
|in the financial services sector and for the fight against tax evasion and avoidance are implemented and applied in its territory». Article 142 sets that «[t]he MFN (most-favoured-nation — clarified) treatment granted in accordance with the provisions of this Chapter shall not apply to the tax treatment that Parties are providing or will provide in future on the basis of agreements between the Parties designed to avoid double taxation» .
Chapter 4 «Taxation» of title V «Economic and sector cooperation» consists of 4 important articles (349-352) which provides the following: «the Parties shall cooperate to enhance good governance in the tax area, with a view to the further improvement of economic relations, trade, investment and fair competition … (they — added) recognise and commit themselves to implementing the principles of good governance in the tax area, i.e. the principles of transparency, exchange of information and fair tax competition, as subscribed to by Member States at EU level. To that end, without prejudice to EU and Member States competences, the Parties will improve international cooperation in the tax area, facilitate the collection of legitimate tax revenues, and develop measures for the effective implementation of the abovementioned principles … (they — added) shall also enhance and strengthen their cooperation aimed at the improvement and development of Ukraine’s tax system and administration, including the enhancement of collection and control capacity, with a specific focus on Value Added Tax (VAT) refund procedures, to avoid accumulation of arrears, ensure effective tax collection and reinforce the fight against tax fraud and tax avoidance. The Parties shall strive to enhance cooperation and sharing of experiences in combating tax fraud, in particular carousel fraud … [they — added] shall develop their cooperation and harmonise policies in counteracting and fighting fraud and smuggling of excisable products. This cooperation will include, inter alia, the gradual approximation of excise rates on tobacco products, as far as possible, taking into account the constraints of the regional context, including through a dialogue at regional level and in line with the World Health Organisation Framework Convention on Tobacco Control of 2003. To this end, the Parties will look to strengthen their cooperation within the regional context» 
|Also Annex XXVIII to chapter 4 «TAXATION» when provide which EU legislation Ukraine has to implement. They are 9 different directives with timetables of implementation.
Thus, there is no direct interconnection between taxation, especially tax control, and SMEs in the Association agreement, but systematic interpretation leads us to the following conclusions. Tax administration which conducts tax control shall be enhanced and strengthened in the contexts of some areas defined in articles 127, 349-352. Whilst articles 76, 282, 378, 379 stress on improvements of the administrative and regulatory framework. In my opinion such a framework includes tax administration, which can be considered as a part of administrative framework.
Last but not least it should be highlighted that EU legislation is not applicable in Ukraine until the latter enters the EU and if there are special rules in EU act, such rules are met. Nevertheless, the provisions of some legislation of the EU should be implemented earlier in accordance with the Association Agreement. Moreover, the Higher administrative court of Ukraine stresses that taking into account European direction of Ukraine and the purpose of the Law of Ukraine on March 18, 2004 № 1629-IV «On the national programme of adaptation of legislation of Ukraine to legislation of the European Union» and the beginning of action of the Association Agreement between Ukraine and the European Union, the legal position set out in the decisions of the European Court of Justice, may be considered by administrative courts as argumentation, reasoning regarding the harmonious interpretation of national legislation of Ukraine in accordance with established standards of the legal system of the European Union, but not as legal basis (source of law) of settlement of relations for which the dispute arose» — .
2) The second trend is reforms, especially tax reform. This trend is connected with the previous one, but such a trend has more internal direction and short-term and long-term perspectives, when the first one is more directed to international obligations and is long perspective.
On August 6, 2014 at the meeting of the Ukrainian government presented the concept of reforms of the tax system . This document on page 20 shows changes which
|should be implemented in the administration of taxes, but it doesn’t tell anything about changes in tax control .
As a result of the October 26, 2014 parliamentary election, it is important to mention that the ruling parties («Petro Poroshenko Bloc» has 150 of out 450 seats and «People’s Front» has 82 of out 450 seats) maintain special conditions for SMEs and tax reform .
As a result of the existing majority in the Ukrainian Parliament and Government both supported the idea of reforms of the tax system and its implementation by the means of amending the tax code. On December 28, 2014 the Parliament adopted two amending laws: law on amendments to the tax code of Ukraine and some other legislative acts of Ukraine regarding tax reform  (hereinafter — the tax reform law) and law on amendments to the tax code of Ukraine concerning improvement of tax control over transfer pricing . In my opinion, the problem with the tax reform law can be, because it was adopted with some procedural mistakes.
In accordance with article 90(5) of the Rules of Procedure of the Verkhovna Rada of Ukraine it is established that «draft law, concerning which the Parliament has adopted decisions regarding requirements for its main provisions, principles or criteria shall meet these requirements» . Article 4(1.9.) of the tax code sets one the basic principles of the tax legislation — stability. This principle means that «changes of any elements of taxes and duties cannot be made later than six months before the beginning of the new budget period when new rules and rates are in force. Taxes and fees, their rates, and tax privileges cannot be changed during the budget year» . Thus, the tax reform law contradicts the principle of stability of the tax legislation. On the other hand, the Ukrainian parliament can’t limit itself which derives clause 3 of article 85(1) of the Constitution of Ukraine which says: «[t]he authority of the Verkhovna Rada of Ukraine comprises … adopting laws» . Therefore, article 90(5) of the Rules of Procedure of the Verkhovna Rada of Ukraine contradicts clause 3 of article 85(1) of the Constitution of Ukraine. Otherwise, in 2015 the Ukrainian parliament can’t adopt any laws which changes elements of taxes from July 1, 2015 till December 31, 2015 which are going to entry into force in 2015 and 2016 [131, с. 22-23]. But moving away from this problem, the tax reform law is in force and regulates today`s social relationships.
|The tax reform law changed some provisions of the tax code regarding tax control, but such changes were nor crucial concerning the past regulation. It just changed some provisions or words in articles 63, 64, 70, 73, 75, 78, 80 and 82 of the tax code.
One more important thing in tax reform law concerning SMEs is tax control moratorium in clause 3 of final provisions of the tax reform law which is implemented into the tax code. This clause provides that in 2015 and 2016 tax inspections of enterprises, institutions and organizations, individuals — entrepreneurs, which have the amount of income up to 20 million hryvnia during the previous calendar year, can be conducted by the controlling authorities only on the permission of the government, on the application of the enterprises, institutions and organizations, individuals — entrepreneurs, on the judgement of a court, or on grounds provided by the criminal procedural code. Such a restrictions are not applicable from June 1, 2015 to inspections of the taxpayers of the single tax which belong to the second and third groups of the taxpayers, except ones which perform activity at markets, sale of goods in small retail trade network through means of mobile network .
Anyway, we can state that the tax reform law hasn’t reached all aimed purposes. Thus, the Ministry of Finance of Ukraine is planning to submit to the Parliament a package of legislative initiatives that will change for the better tax system and investment climate .
One more interconnection between tax control, SMEs and tax reform can be provisions of law on development and state support of small and medium-sized enterprises in Ukraine, where article 4(1) defines the main directions of state policy in the sphere of development of SMEs in Ukraine, especially the following two directions are relevant: (1) improvement and simplification of the order of registration in the context of taxation and (2) establishment simplified system of taxation, accounting and reporting for subjects of small entrepreneurship, which lies under criteria, set by tax legislation . Anyway, such provisions are abstract and tax control can be only one aspect of the main directions of state policy in the sphere of development of SMEs in Ukraine.
|3) One more modern trend is initiatives from the private sector criticizing the existing tax regulation, especially concerning tax control. Active participation of citizens, companies and organizations in draft-law making increases.
For example, the owner of «Textile-Contact» Aleksandr Sokolovskyi on the example of his business provided information about tax control of the company for half a year. Unfortunately, the provided data doesn’t give a possibility to identify a type of enterprise in the context of SMEs. Probably, it can be medium-sized business. Thus, the author stressed that there had been 4 scheduled and unscheduled inspections, more than 20 requests about submission of primary documents, 8 court decisions on seizure of documents and some other actions . Such a practice confirms abusive behavior of the controlling authorities. Some other examples of the abusive practice of the controlling authority are presented by the author of this work earlier [98; 132]
One presentation «A reform of tax system of Ukraine» was prepared by non-governmental organization «Tax Advisors Association». On pages 9-10 of this presentation the following ideas were presented:
1) Elimination of the tax police. On the basis of the tax police, departments of the Ministry Interior Affairs and Security Service, responsible for investigating economic crimes, to establish a separate unit — the Financial Guard subordinated to the Ministry of Finance or the Ministry of Justice.
2) Cancellation of factual and office inspections, verifications.
3) Prohibit violations of working hours of the company during the inspections.
4) Cancel plans for additional accruals.
5) Reduce the number of inspections of taxpayers (including unscheduled ones).
6) Establishment of a single document — the act and tax notice-decision.
7) Development and improvement, and introduction into the tax code clear, transparent and understandable criteria for selecting businesses for inspections.
8) Provide taxpayers the right to choose the method of inspection of the completeness and timeliness of accrual of taxes — the tax authority or audit company. Establish responsibility for audit companies for possible tax additional accrual [135, с. 9-10].
|Such ideas, to some extent, are topical for the reform and can be adopted. Let’s analyze some of the ideas a bit detail.
In respect of the first idea the Ministry of Finance told that the state fiscal service in near future would be subordinated by the Ministry of Finance .
Concerning inspections and verifications, I doubt that we can just eliminate factual and office inspections, verifications, because sometimes such inspections are useful to control, for example, factual presence of goods. In the context of this problem it is better to reduce number of these inspections.
Verifications have more difficult nature. The main differences between inspections and verifications are: verification is not an inspection; they have different results they are conducted by different bodies; they have different subjects. Some violations can occur in case when taxpayer doesn’t provide demanded information and the controlling authority adopt an act, but it shall be only certificate (inquiry). Such a certificate can have conclusions regarding compliance of tax legislation by the taxpayer [127, с. 139-140].
In this prospective I see that it is better to enhance and promote electronic inspections. Moreover, such inspections preferably could be the main form of inspections. In the mentioned post from the Facebook it is also mentioned that it is impossible to send demanded documents via the Internet . Thus, it would simplify procedures and time of the sides. Electronic inspections could be scheduled and unscheduled, but they would be always off-site. Only if the controlling authorities had doubts concerning activity of the enterprise it could conduct the factual or scheduled on-site inspection. Anyway, criteria for non-electronic inspections could be complicated in order to prevent abusive behavior of the controlling authorities. Establishment of electronic inspections as the main type of inspections could eliminate the problem of violations of working hours of the company during the inspections. In this context one more trend can be identified. This is informatization which is interlinked with e-governance, but the latter is narrower. This trend is very spread in the world and its significance should be reevaluated.
The idea of the establishment of a single document instead of the act and tax notice-decision is topical in the existing system, when the controlling body can abuse tax notice-
|decision which has problematic nature within the concept of administrative acts , because only administrative act can be appealed.
Last but not least, the next idea is to reduce the number of inspections of taxpayers should be supported. As it was mentioned the tax code provides periodicity of document scheduled inspections of taxpayers which is determined by the degree of risk in the activities of taxpayers and is categorized into high, average and small. Low risk taxpayers are included in the schedule for the inspection not more than once every three calendar years, average risk taxpayers — not more than once every two calendar years, high risk taxpayers — not more than once per calendar year. Unfortunately, there is no legal act which interprets these risks, but recently the draft of the order of the Ministry of Finance of Ukraine «On approval of the formation of schedule conducting document scheduled inspections of taxpayers» has been presented. This draft singles out different criteria for the following tax payers: (1) legal entities (it separates criteria for participants of foreign economic activity), (2) financial institutions, permanent missions and representative offices of non-residents (it includes criteria for bank institutions, non-bank institutions, permanent missions and representative offices of non-residents), (3) self-employed persons and (4) legal entities on issues of the correctness of calculation, completeness and timeliness of payment of tax on income of individuals and a single fee for obligatory state social insurance .