ORDER OF THE CABINET OF MINISTERS OF UKRAINE

of August 1, 2013 No. 774-r

About the Strategy of development for management system public finances

1. Approve the Strategy of development for management system public finances which is attached.

2. Approve the Actions plan on strategy implementation of development of management system by public finances which is applied.

3. To the ministries and other central executive bodies:

provide timely accomplishment of the actions plan approved by this order;

submit quarterly to the 15th day of the next month to the Ministry of Finance information on the course of accomplishment of the specified actions plan for its generalization and representation to ten-day time to the Cabinet of Ministers of Ukraine.

4. Recognize invalid acts of the Cabinet of Ministers of Ukraine according to the list which is attached.

Approved by the Order of the Cabinet of Ministers of Ukraine of August 1, 2013 No. 774-r

Strategy of development for management system public finances

I. General provisions

The management system public finances in Ukraine is basis of ensuring sustainable development of the country and the guaranteed accomplishment of social obligations to citizens.

Public finances have strategic importance for regulation, in particular, of real production sector and the financial sector, ensuring development of regions, supports of business activity, and their potential is basis of economic and social development of Ukraine. System effectiveness of management of public finances is important for ensuring stability of the budget system, and also general financial safety and sustained economic growth.

Number of elements, in particular the government budget, local budgets, off-budget funds, finance of the public corporate sector is part of management system public finances.

During 2010-2012 in development of management system by public finances of Ukraine positive results were achieved. Now the considerable part of problems on reforming of management system public finances is solved within accomplishment of the Program of economic reforms for 2010-2014 "Rich society, competitive economy, the effective state". Tasks and actions of this Strategy are determined taking into account need of further development of management system by public finances, and also problems in the specified sphere requiring the immediate solution. It requires search of new decisions for the purpose of increase in efficiency of functioning of management system public finances and its components.

The purpose of this strategy is determination of the main problems of development of components of management system public finances for the average and long-term period and ways of their decision within the integrated approach necessary for creation of effective management system public finances. The task of medium-term nature is supposed to execute during one - two years, and long-term nature - during three - five years.

Public finances which development will be provided according to this Strategy treat management system components:

taxation system;

mid-term budgetary forecasting, mid-term budgetary planning, program and target method, strategic planning at the level of the ministries, other main managers of budgetary funds;

liquidity managements of public finances and public debt;

quasifiscal transactions;

system of financial accounting in public sector;

system of public procurements;

state investments;

state internal financial control;

independent external financial control;

anti-corruption;

access for the public to information on budget questions.

Concerned parties are the state on behalf of public authorities, in particular Audit Chamber, the Cabinet of Ministers of Ukraine, the Ministry of Finance, Mindokhodov, Ministry of Economic Development, of Ministry of Justice, the companies and the public.

II. Taxation system

Purpose

The purpose of development of this component is creation of the modern fair fiscal system providing equality of all taxpayers before the law and achievement of strategic objectives of sustainable development in system of state regulation of economy.

Description of situation

Global financial crisis negatively influenced economy of Ukraine. In 2009 the real gross internal product was reduced on record percent 14,8 that matched considerable devaluation of national currency (for 48 percent) and the high rate of inflation (percent 15,9). In 2010 economic revival began: the gross internal product in 2010 and 2011 grew respectively by percent 4,1 and 5,2. However in 2012 economic growth was slowed down to percent 0,2 generally owing to adverse external conditions and delay with structural reforms. The ratio of the state and guaranteed by the state debt to gross domestic product grew with percent 12,3 in 2007 to percent 36,6 in 2012.

Strengthening of economic capacity of Ukraine is promoted by strategic arrangement, the high education level of citizens and rich resources. However the indicator of gross domestic product per capita remains at a low level, as well as amounts of direct foreign investments.

In comparison with other states of Ukraine has higher tax burden of economy both at the expense of direct and indirect taxes, and at the expense of single social fee (in comparison with Poland, the Republic of Bulgaria, the Czech Republic, the Russian Federation).

For the last decade the ratio of taxes to gross domestic product gradually grew. Such tendency of cumulative receipts is promoted before by indirect taxes. Actually the share of the value added tax and the excise tax in gross domestic product from 2001 for 2012 was doubled.

Development of management system by public finances requires ensuring timely accomplishment by the state of obligations to subjects of managing on compensation of the value added tax from the budget.

The system of administration of the specified tax underwent numerous changes, last of which happened to adoption of the Tax code of Ukraine.

Along with increase in system effectiveness of administration of the value added tax, introduction of new incentives for taxpayers (decrease in rate of the taxation, automatic budget compensation of the value added tax) in Ukraine mechanisms of fight against abuses in the sphere of collection of the value added tax are enhanced. The most effective measures are those which are directed to prevention of emergence of violations.

The automatic system of comparison of the tax liabilities and the tax credit by partners which functions based on disaggregations of the tax liabilities and the tax credit by partners, - the Unified register of tax delivery notes is for this purpose implemented.

Number of events is held for the purpose of timely compensation of the value added tax from the budget.

In 2009 excises on tobacco products and alcoholic beverages considerably raised. Unlike indirect taxes the direct taxes did not raise. Their growth was observed in the period of pre-crisis revival in 2001-2008 that was promoted by salary increase and good results of activities of the companies. However after crisis share of the direct taxes concerning gross domestic product it was reduced to the level of 2000.

At the same time it should be noted positive tendency in reforming of the taxation system which was created for the last three years. It, in particular, is confirmed by increase on 18 line items on Ukraine constituting "Taxation" of rating according to the published rating of usefulness of business environment of Doing Business 2013, which is annually constituted by the World Bank and the International Finance Corporation. Determining for increase in line item in rating became adoption of the Tax code of Ukraine by which it is cancelled number of inefficient taxes and fees.

Besides, as a result of adoption of the Tax code of Ukraine the general level of the tax burden of subjects of managing is considerably reduced. So, in particular, the rate of the income tax of the companies step by step decreases. In 2013 it constitutes 19 percent, and since 2014 will constitute 16 percent. Since 2014 also the rate of the value added tax from 20 to 17 percent will decrease.

Privileges on the income tax of the companies and the value added tax when holding energy saving actions are also entered, productions of energy saving goods, implementation of energy efficient projects and preference for subjects of managing which perform the activities connected with information technologies.

Realization of provisions of the Tax code of Ukraine concerning reduction of the tax load and enhancement of system of administration of taxes promotes growth in volumes of own means of the companies which can be directed to the investment purposes, and also to forming of conditions for reduction of scales of the shadow sector and respectively increase in tax revenues in the budget.

Fixing at the legislative level of the mechanism of transfer pricing became the following step in this direction. So, it is provided that control over transfer pricing will be exercised when carrying out transactions between the connected persons and between persons registered in the country with low rates of the taxation which amount with each partner makes more than 50 million hryvnias annually, for the purpose of check of correctness, completeness of charge and the tax discharge on profit of the companies and the value added tax.

Implementation in practice of transfer pricing and its effective application will allow to prevent artificial redistribution of assets in system of multinational corporations, will create conditions for forming of fair competitive environment, reduction of tax pressure upon legal business as a result of transparent determination of market price, non-admission of cases of evasion from the taxation.

Determination of problem

The main problems are imperfection of system of administration of taxes, uncertainty concerning rules of the taxation and ambiguous application of the legislation. At the same time the amount of the shadow sector of economy demonstrates that enhancement of system of collection of taxes and charges can increase tax revenues considerably. Improvement of administration of taxes and fees needs to be performed along with reforming of policy of the taxation that will allow to simplify the procedures connected with tax payment and charges, to avoid ambiguous application of the legislation and to promote justice and system effectiveness of the taxation.

It is necessary to continue work on further enhancement of the mechanism of automatic compensation from the budget of the value added tax for increase in level of such compensation. The system of compensation is constructed of the budget of the value added tax in such a way that its legitimacy is recognized Mindokhodov only after the corresponding check, slows down process of budget compensation, namely return to subjects of managing of current assets. It is necessary to determine the term during which bodies of the income and charges need or to confirm legitimacy of compensation, or to prove the fact of violation of the tax legislation. The amount declared to compensation on which the decision is not made during such term shall be considered as debt on compensation of the value added tax from the budget. For the purpose of realization of the specified approach it is necessary to make to the Tax code of Ukraine changes concerning determination of term during which legitimacy of the declared amounts on compensation from the budget of the value added tax will be performed.

It should be noted that for successful business development in the country fiscal policy of the state shall be consecutive, flexible, quickly react to urgent requirements of the entrepreneurial circle, economy environment.

Tasks and actions

Tasks of medium-term nature are:

budget and tax consolidation;

fiscal stabilization;

liquidation of special tax benefits on the income tax of the companies, reduction of the discouraging influence of privileges on payment of single social fee, reduction of opportunities of any application of simplified taxation system by small enterprises;

growth in volumes of receipts from the value added tax;

review of criteria for receipt of the right to automatic budget compensation of the value added tax;

enhancement of tax statements on the value added tax for destruction of schemes of minimization of the tax liabilities taking into account data of the Unified register of tax delivery notes;

establishing exchange in real time between payers of the VAT and body of the income and information collections about availability in the reporting of the taxpayer of discrepancies with data of partners.

For accomplishment of the specified tasks implementation of the following measures is supposed:

cancellation of tax benefits for the separate companies and industries;

increase in rate of tax for emissions in atmospheric air of carbon dioxide;

transition to system of the taxation of real estate objects on the basis of cost;

reduction up to five days the term of conducting cameral check for budget compensation of the value added tax to payers with positive tax history in three last years;

increase in share of the value added tax which will be compensated in the automatic mode, in the total amount of budget compensation.

Task of long-term nature is enhancement of regulatory legal acts on the tax matters.

For accomplishment of this task implementation of the following measures is provided:

balance of interests of monitoring bodies and taxpayers;

introduction of legislative tools for realization of the principle of activities on commercial basis (the principle "at arm's length").

The expected results

By results of accomplishment of tasks it is provided:

provide budget and tax consolidation by implementation of the actions directed to increase in receipts;

enhance regulatory framework on the tax matters taking into account international standards that will be able to provide improvement of conditions of business activity and increase in tax revenues in the long-term period;

order tax benefits for the separate companies and industries that can increase receipts, without influencing at the same time the volumes of investment of the companies;

change structure of taxes with the shift of accents on direct taxation on indirect that will promote economic growth;

provide use of capacity of system of the excise taxes (in particular in the shadow sector) and the real estate taxation that will promote increase in receipts in the medium term (transition to system of the taxation on the basis of cost will demand inclusion of commercial real estate in taxation basis and cancellations of privileges in the taxation).

Risks

It is necessary to refer violation of balance of interests of the state and subjects of managing when implementing actions for enhancement of elements of the taxation system to possible risks which can interfere with accomplishment of tasks.

III. Mid-term budgetary forecasting and conceptual bases of mid-term budgetary planning, program and target method, strategic planning at the level of the ministries, other main managers of budgetary funds

1. Program and target method at the level of the government budget

Purpose

The purpose of development of this component is ensuring development of program and target method in the budget process for adaptation of indicators of the budget programs with priorities of social and economic development and ensuring measurability of socially important results of realization of state policy, increase in efficiency of use of budgetary funds.

Description of situation

The program and target method is method of management of budgetary funds according to which the planning system and uses of budgetary funds is oriented to achievement of specific results that allows to improve quality of the state services and to provide optimum distribution of the budget resources in the conditions of their limitation.

Separate elements of program and target method began to be applied in the budget process of Ukraine since 1998, in particular the budget requests with obligatory determination by the main managers of budgetary funds of main objective of activities, tasks for planned year, and also with carrying out the analysis of the results of activities achieved last year, and forecasting of the expected results of activities in the current year, reasons for limiting distribution of amount of expenses by codes of functional classification and activities were entered.

Implementation of program and target method in full began with adoption in 2001 of the Budget code of Ukraine which, in particular, are given definition of the term "budget program", classification of expenses of the budget are included program classification of expenses, normirovan representations of expenses of the government budget on the main managers with disaggregation according to the budget programs, the principles of the budget system of Ukraine are referred the principles of efficiency and target use of budgetary funds (the principle of efficiency and effectiveness and the principle of target use of budgetary funds - according to the Budget code of Ukraine which became effective on January 1 2011). The basic methodological principles, elements and the principles of program and target method are determined by the Concept of application of program and target method in the budget process approved by the order of the Cabinet of Ministers of Ukraine of September 14, 2002 No. 538 (The Official Bulletin of Ukraine, 2002, No. 38, the Art. 1793).

For regulation of program and target method in the budget process it was also accepted regulatory legal acts which, in particular, regulate questions:

procedure for creation, consideration, approval and determination of the main requirements to accomplishment of estimates of budgetary institutions;

status of executives in charge of the budget programs and features of their participation in the budget process;

rules of creation of passports of the budget programs and reports on their accomplishment;

the productive indicators characterizing accomplishment of the budget programs.

The best experience of practical application of program and target method within ten years, analysis results of its regulatory and methodological base are the basis for offers in the Budget code of Ukraine (concerning enhancement of program and target method in the budget process) which became effective on January 1, 2011.

For implementation of provisions of the Budget code of Ukraine concerning application of program and target method in the course of forming and execution of the State Budget it is enhanced and expanded regulatory framework, in particular are determined by orders of the Ministry of Finance:

general requirements to determination of productive indicators of the budget programs;

organizational and methodological bases of efficiency evaluation of the budget programs;

single methodological approaches to preparation by the main managers of budgetary funds of projects of procedures for their use.

According to the legislation the main manager of budgetary funds will organize and provides based on the plan of activities and indicative forecast indicators of the budget for the following for planned two budget periods creation of the draft of the estimate and the budget request and gives them the Ministry of Finance (local financial body).

In the budget request, according to the instruction of the Ministry of Finance for preparation of the budget requests, the main manager of budgetary funds specifies the purpose of activities and task directed to achievement of strategic objectives of social and economic development of the country and are determined by plans of its activities on planned and following for planned two budget periods, and also limiting distribution of amount and indicative forecast indicators according to the budget programs. The specified information shall characterize activities of the main manager of budgetary funds, cover all spheres in which he provides realization of state policy, to cover the most socially significant results of its activities and to consider the corresponding indicators of activities of executives in charge which work will be organized and coordinated by the corresponding main manager of budgetary funds.

The main manager of budgetary funds, according to methodical recommendations of the Ministry of Economic Development about plan development of activities of the main managers of budgetary funds, provides coordination of plans of the activities and the budget request.

The plan of activities of the main manager of budgetary funds is the main document on planning of state policy in the respective sphere and determines the purposes of the main manager of budgetary funds as subject of public administration in the respective sphere, strategic objectives, tasks, actions and the expected results of activities taking into account the available resources.

Such plan and the status report its execution affirm the head of body of planning. At the same time for ensuring accomplishment of the plan of activities of body of planning - the ministries - the minister affirm work plans, both the ministry, and the central executive bodies which activities go and coordinated by it.

At all stages of the budget process the main managers of budgetary funds, the Ministry of Finance and other participants of the budget process within the powers carry out efficiency evaluation of the budget programs, provides implementation of actions for monitoring, the analysis and control of target and effective use of budgetary funds. The efficiency evaluation of the budget programs is performed based on the analysis of productive indicators of the budget programs, and also the other information containing in the budget requests, estimates, passports of the budget programs, performance reports of estimates and reports on accomplishment of passports of the budget programs.

For the purpose of ensuring availability of information on the budget the main managers of means of the government budget annually perform public representation and the publication of information on the budget for each budget program, including the data about productive indicators of its accomplishment, and the approved plans of activities and reports on their accomplishment will promulgate on the official site.

At the present stage development of program and target method happens in the direction of optimization of number of the budget programs, "Rich society, competitive economy, the effective state" is provided by the Program of economic reforms for 2010-2014. The necessity of optimization is caused, first of all, by administrative reform that is carried out now in Ukraine and provides optimization of system of the central executive bodies for the purpose of elimination of duplication of their functions and level of public administration.

The Cabinet of Ministers of Ukraine approves the Strategy of optimization of number of the budget programs in which the basic principles and ways of optimization of number of the budget programs are determined. The Ministry of Finance annually by preparation of the bill on the Government budget of Ukraine together with the main managers of means of the government budget pays special attention to optimization of the budget programs. So, in the Law of Ukraine "About the Government budget of Ukraine for 2012" in comparison with the Law of Ukraine "About the Government budget of Ukraine for 2011" the number of the budget programs it is reduced by 38 percent (from 901 to 559), the Law of Ukraine "About the Government budget of Ukraine for 2013" contains 544 budget programs.

Determination of problem

The main problem is need of further development of program and target method in the direction of optimization of the budget programs that is caused by the need for review of the budget programs and refining of their productive indicators taking into account results of administrative reform, and also strengthening of analyticity and informational content of productive indicators on achievement of specific results of realization of state policy in economy industries.

In the annual President's letter of Ukraine to the Verkhovna Rada of Ukraine "About domestic and external situation of Ukraine in 2013" the priority task of the budget policy in the medium term determines enhancement and expansion of application of program and target method of budgeting.

Enhancement of application of program and target method in the budget process shall be aimed at providing quantitative expression of the expected results of accomplishment of the budget programs that will promote better efficiency evaluation of various programs and selection of those which will have maximum efficiency in case of the minimum costs.

Tasks and actions

The main objective of long-term nature is ensuring further development of program and target method, is applied at the level of the government budget.

For accomplishment of this task implementation of the following measures is provided:

enhancement of methodological base by determination of productive indicators of the budget programs, in particular regarding ensuring quantitative expression of the expected results of accomplishment of the budget programs and their compliance to priorities of state policy;

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