Reducing corruption and tax avoidance with a modern public finance system

Project description

Title: Good Financial Governance
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ), UK Aid
Country: Ukraine
Lead executing agency: Ministry of Finance of Ukraine
Overall term: 2014 to 2019

Context

In 2014, Ukraine signed an Association Agreement with the European Union (EU). As a result of this, the Government of Ukraine has to implement a programme of reforms. These will trigger comprehensive changes in the country. One example of this is the restructuring of the public finance system. The objective is to manage the Ukrainian national budget more effectively with the aid of European and international standards. It is planned that tax reform will mobilise domestic resources for sustainable development. Ukraine is also fighting corruption in the country and improving the effectiveness of its public administration.

Despite some considerable successes, the public finance system still faces major challenges: the State Fiscal Service, Ministry of Finance, Parliament and the Accounting Chamber of Ukraine all need to modernise their working procedures and make them more transparent. The State Fiscal Service does not operate in a manner that is responsive to citizens’ needs.

The Ministry of Finance has difficulties in coordinating the financial budgeting process with the State Fiscal Service and the sectoral ministries. Corruption is a problem at all levels. The level of motivation among public service employees is poor as they are not held in high regard within society, their earnings are low and they have limited career prospects.

Objective

The Ministry of Finance and the sectoral ministries have introduced and implemented European standards in their financial planning. As a result, the public finance system has become more transparent, more effective and more accountable.