Ukraine signs up to the OECD tax initiative – but will it ratify it?

Of the many questions/thoughts this blog asks when an entry appears, more often than not at least one of the following is among them on every entry:

  1.   Follow the money!
  2.   Who benefits?
  3.   Who decides, and who decides who decides?

Of course (almost) nothing in life is free, there are always beneficiaries to any decision, and who decides, and who decides who decides are all common features of daily life – a cynical and skeptical bias is sometimes necessary when asking these questions and objectivity should perhaps take priority over subjectivity when drawing conclusions when reaching answers.  Some outcomes are clearly nefarious and others less so, if at all.

23rd July witnessed Oksana Markarova, the Acting Finance Minister of Ukraine, sign the nation up to the Multilateral Convention on the Implementation of Measures Relating to Tax Agreements – hurrah!

While a reader is encouraged to explore the above link, of the 15 point OECD initiative, there are perhaps four significant points that will benefit Ukraine insofar as the national budget is concerned.

– Step 5: “Improving measures to combat tax abuses”
– Step 6: “Prevent Abuse of Privileges Under the Bilateral Agreements”
– Step 13: “Recommendations on transfer pricing documentation and disclosure of information by country”
– Step 14: Improvement of the Mutual Coordination Procedure through Dispute Resolution.

The entire point of any tax or AML legislation is to reduce the wiggle room these schemes have to operate in easily.  Actually throwing people in jail is secondary to reduction through prevention in the first place – though it is of course absolutely necessary to prosecute those that transgress.  What point legislation if it is not effectively implemented?

The question is now whether the Verkhovna Rada will actually ratify the signing of this instrument so that it can be deposited with the OECD.

There are many international instruments where numerous nations are signatories (with or without reservations) that have not ratified or deposited these legal instruments (with or without reservations).

(A “reservation” is a unilateral statement, however phrased or named, made by a State, when signing, ratifying, accepting, approving or acceding to a treaty, whereby it purports to exclude or to modify the legal effect of certain provisions of the treaty in their application to that State – so long as any reservation(s) do not make the treaty more or less worthless in its application to that State of course.)

How long between the signing and ratification of this international instrument is a matter for the Verkhovna Rada.  It is unclear whether any reservations were made, or will be made by Ukraine if it ratifies and deposits this instrument.

To be blunt it is probably not a matter of “if” Ukraine will ratify this instrument, but rather a question of “when”.  A question of timeliness from signature to ratification.

Even if/when Ukraine ratifies and deposits this instrument there will of course be “work a-rounds” for those determined to find a way – but as stated at the start of this entry, the legislative goal is to consistently reduce the space for nefarious scams and schemes to operate in with ease, and therefore this is another small but positive step in that direction.