Vicious circle.

Now the State Tax Service of Ukraine (STS) mentions “digitalization”, “digital transformation” in almost every message.. For example, in one of the latest messages it is once again said that in order to digitalize the tax service, “on the basis of process reengineering, the priorities of digital projects are determined, business cases are prepared to attract financing, and the functional design of IT systems is developed.”.

This causes a feeling of deja vu, which can be expressed by the very famous expression “it’s already happened.”!

Indeed, in June 2018, the Ministry of Finance announced an Action Plan for reforming the State Financial Service (SFS). This plan included measures in four areas, one of which was the reengineering of core business processes and ensuring the effective use of IT. The implementation of the Action Plan for reform of the State Fiscal Service should have been completed in 2019.

And six years before the Action Plan for reforming the State Fiscal Service, in August 2012, Alexander Klimenko, the odious head of the Ministry of Revenue and Duties of Ukraine (which at that time united tax and customs authorities), in an interview with ZN. UA from 31. 08. 2012, presenting the already completed modernization of the tax service, noted: “We completed the tax service modernization project on time. And now we have one of the most powerful information systems in Ukraine among all government agencies... and we are now able to solve information mega-tasks"

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It seems that the reform and modernization of the tax service follows a vicious circle of imitation and hype under any government. We are seeing some unfulfilled promises being replaced by others that no one actually intends to keep..

Thus, the bill “On amendments to the Tax Code of Ukraine and other laws of Ukraine on establishing the specifics of service in tax authorities and conducting certification of officials of tax authorities” (register. No. 9243 from 26. 04. 2023; initiator - Daniil Getmantsev and others. ) has not moved for three years. Getmantsev’s promise to carry out a complete reboot of the tax service by the end of 2023 has been forgotten.

System shortcomings.

Constant statements about the digitalization of the State Tax Service sound great until you delve into this topic yourself. It seems that those in power expect people to believe that the endless repetition of the mantra “digitalization” will itself ensure the effectiveness of government bodies.

The activities of the State Tax Service are coordinated by the Ministry of Finance, and the service itself is only one of the subjects of the public financial management system (PFMS), which, in addition to the tax service, includes the following services: customs; financial monitoring; treasury; audit.

Back at the end of 2021, by orders of the Cabinet of Ministers, the Strategy for the implementation of digital development, digital transformations and digitalization of FUMS for the period until 2025 and the Action Plan for its implementation were approved (Order of the Cabinet of Ministers dated 17. 11. 2021 No. 1467-r), updated in 2025.

In reality, the digitalization of each FSFM body is carried out without a single systematic approach, separately through various intermediaries and with the involvement of foreign experts who, most likely, do not have adequate knowledge about the tax system, tax IT structure, information arrays and State Tax Service systems, tax administration and tax control of Ukraine.

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At the same time, State Tax Service specialists do not have sufficient relevant competencies to independently and effectively carry out the corresponding digital transformation.

This Strategy, as well as the digital development plan of the State Tax Service mentioned below, do not take into account the need to comply with the digitalization initiatives and products of the FSFM bodies of Ukraine with the principles of digital law of the European Union and numerous recommendations of the Organization for Economic Co-operation and Development (OECD), including in the field of information security.

The OECD has developed dozens of these recommendations on the use of IT technologies by tax authorities, digitalization of activities and the use of compliance risk management. Attention to the issue of digitalization of tax authorities has especially grown over the past ten years since the publication of the OECD Report “Technologies for Better Tax Administration” in 2016.

In April 2024, the European Commission approved the Ukraine Facility Plan for 2024–2027, proposed by the Ukrainian government, which in total contains 146 indicators and determines the conditions for providing Ukraine with 50 billion euros in grants and loans. One of the indicators is the adoption in the fourth quarter of 2024 of the Strategic Plan for Digital Development, Digital Transformation and Digitalization of the State Tax Service in accordance with the recommendations of the National Revenue Strategy for 2024–2030. The digital development plan of the State Tax Service of Ukraine until 2030 (hereinafter referred to as the Plan) was put into effect by order of the Ministry of Finance dated 24. 12. 2024 No. 660.

It is interesting that among the many advantages of digitalization listed in the Plan, the reduction in the number of officials of regulatory authorities is not even mentioned.

Although the OECD, in its Tax Administration 2025: Comparative Insights from the OECD and Other Developed and Developing Countries, explicitly states that technology and digital transformation of tax authorities are “helping fewer staff serve more taxpayers.”. This does not prevent the State Tax Service from creating new networks: consultation centers on issues of stopping registration of tax invoices/adjustment calculations; compliance managers for members of the “White Business Club” (over 600 tax officers), which are examples of anti-digitalization.

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The State Tax Service has not understood that one of the consequences of successful digitalization of tax activities is a situation where IT systems automatically function without unnecessary interference from tax authorities in the activities of taxpayers, including sending numerous requests for additional information, documents, explanations.

The opacity of a two-year pilot project on the functioning of the tax risk (compliance risk) management system in the State Tax Service, introduced since 31, also requires attention.. 07. 2024 by resolution of the Cabinet of Ministers dated 25. 07. 2024 No. 854.

Real information about the progress and status of the experiment, which should be completed in four months, 31. 07. 2026, missing. Its absence casts doubt on the objectivity of the decisions of the State Tax Service on conducting control and inspection activities.

We also note that the digital development of the State Tax Service is largely carried out under the auspices and with funds from various international programs, for example, the EU Support Program for Public Financial Management Reform in Ukraine (EU4PFM), which has been operating in Ukraine since 2019. That is, it depends on external funding, external expertise, involved intermediaries and can be stopped at any time. After which specialists from the Ministry of Finance and the State Tax Service will not know what to do next with this.

There is also the issue of ownership rights to software products created for the State Tax Service at the expense and coordination of international programs.

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Let us also recall that effective digitalization of low-quality, artificially complicated, chaotic tax legislation is impossible. Because if “garbage is in, then it is also out”. That is, the quality of IT and digital tax solutions largely depends on the quality of the tax legislation itself.

Performance Markers.

There is no real reduction yet: the “shadow” economy; taxpayers' time for tax administration; number of tax workers; the number of requests (requests) from tax officials to taxpayers, the digitalization of the State Tax Service can be assessed as ineffective and aimed at obtaining increasing amounts of information from and about taxpayers and strengthening further fiscalization, tax pressure and control over their activities.

At the same time, you need to realize that digitalization cannot be stopped - this is a global trend. But it is necessary to demand that the digitalization of tax activities be real, effective and tangible. Simple markers of the effectiveness of this process are given above.

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