The first episode of Season II is about taxes and the financial situation in Ukraine in general. What was the main threat to our economy in the first weeks of the war? Why is the shadow tobacco market much more complicated than the vodka market? Whose salaries do MPs envy? How did big business lobby for its interests through amendments to the Tax Code?
In the new episode of the podcast “Budget Talks” you will find answers to these and other topical questions. Victor Maziarchuk, Head of the Center for Fiscal Policy Research, and Danylo Hetmantsev, MP, Head of the Committee on Finance, Taxation and Customs Policy, discuss changes in the tax legislation and their consequences for the budget and for business.
VICTOR
Hello to all listeners of the “Budget Talks” podcast. This is the second season, and today we are diving into an incredibly intriguing topic. It’s controversial and very heated. We’re talking about taxes, the tax system, and the budget. How fair is the tax system? How have the tax rules of the game changed for businesses and citizens? And what will happen to Ukrainian public finances in 2025?
Our podcast is supported by the International Renaissance Foundation within the framework of the project “Effective Public Finance Management: New Opportunities for Government Bodies.” I’m Viktor Maziarchuk, Head of the Fiscal Policy Research Center. And today, I have the honor of speaking with a person who knows practically everything about taxes and the tax system since he is actively involved in shaping it. He is responsible for ensuring that taxes are fair and that the Ukrainian army is properly funded. Welcome, Danylo Oleksandrovych Hetmantsev, Chairman of the Finance, Tax, and Customs Policy Committee.
DANYLO
Hello, Viktor. Thank you very much for the invitation. I don’t think it’s quite right to say that I shape tax policy. I’m definitely involved in it, but in reality, many more people are involved in its formation.
VICTOR
Of course. You’re the leader of the group of people who shape it.
DANYLO
I just have my own opinion, which I hope is taken into account.
"I am the top specialist in making unpopular decisions"
VICTOR
Let’s start with a simple question. Since my professional focus is the budget, what is the budget from a politician’s perspective?
DANYLO
I actually like the definition from the Budget Code – it’s a plan for the allocation and use of financial resources for the powers assigned to a state body. It accurately reflects the essence of this concept. But to put it more simply, for me, the budget is the main instrument of state policy. We can initiate any projects, grant powers to bodies, create programs—anything we want—but if they are not backed by money, they are stillborn. Therefore, the budget and the budget process are the primary tools of state policy at all times and in all countries where a budget as such exists.
VICTOR
When we talk about taxes, I immediately think of taxes, the budget, and the budget process. The government submits a draft budget to the Verkhovna Rada, along with so-called resource bills. Let me explain to our listeners and viewers. Resource bills are legislative proposals that often change existing rules, increase taxes, or expand certain provisions. One of the most controversial was Bill 5600, which aimed to increase tax revenues.
DANYLO
I completely disagree with calling it controversial. Why? Because every tax law sparks discussion. There hasn’t been a single tax law that has passed through our Committee in the past six years without debate or applause.
VICTOR
This one was the most contentious. I analyzed the data to understand which bill generated the most debate across different sectors.
DANYLO
Discussions always occur. That’s normal. And the parties in these debates are never fully satisfied with the final outcome. The task of our Committee is to find a balance—a balance between the interests of business, the state, society, and various groups. This balance always lies somewhere in the middle and rarely satisfies those who want to resolve issues solely in their favor. But that’s normal. Every tax law change sparks some controversy. I honestly didn’t measure or compare, say, Bill 1210 and 5600 or any other bills we’ve had. You’d know better. But I can openly say that not a single one was met with applause. As I’ve said before, I am the top specialist in making unpopular decisions in this country.
The principle of stability is extremely important to me. I have been teaching at the university for a long time, and my textbooks clearly state that this is the fundamental principle of tax legislation, which must be adhered to, as any deviation leads to consequences in law enforcement. Departing from this principle was quite painful. In 2022, we significantly deviated from it. For instance, the law on changing gas rent rates was passed retroactively in March, coming into effect from March 1. We violated not only stability but also introduced retroactivity, which is a serious legal violation. We repeated this mistake several times, for example, with bank taxation. We made changes retroactively. Speaking specifically about tax relations and the stability of tax legislation, I must say that we significantly violated it in 2022, 2023, and 2024, prioritizing circumstances we deemed more important than adhering to this principle.
Sometimes, we could have avoided violations. For example, the law on tax increases in 2024, including the military tax hike—I believe the government had all the opportunities to introduce it earlier in the year. By February, it was already clear that there was a gap. It was a matter of simple mathematics, acknowledging the need for an unpopular decision. They delayed it until July, which led to a pointless debate over what to keep and what to change. Eventually, it was signed and took effect from December 1, with all possible mistakes made during its adoption. This was probably the first bill in five years where the leadership didn’t come from our Committee but from the government and the President’s Office. Perhaps the lack of experience or other factors made the bill’s adoption unusually difficult, even though it was absolutely justified, understandable, and acceptable to society.
How the Big Business Lost Its Tax “Perks”
VICTOR:
Let’s go back to Law 5600. It’s been a highly controversial bill, not just among the public, experts, and businesses but even among your colleagues—over 11,000 proposals were submitted for it. A special procedure had to be adopted. Could you share some interesting facts about why there was such a strong reaction? Where were the toughest battles?
DANYLO:
Honestly, I can’t quite explain why you picked this particular bill—probably because of the number of amendments. But in reality, there were even more amendments to the “anti-Kolomoisky” law. That one was discussed in the committee for a whole week—from morning to evening. I think there were more than 12,000 amendments. So, it wasn’t the highest number of amendments.
Speaking of Law 5600, it’s essentially a collection of norms affecting various sectors and interests. For instance, let’s take the poultry tax exemption—a wonderful benefit that allowed poultry producers to pay taxes under the fourth group of the simplified tax system. Basically, a poultry factory would pay profit tax based on the area it occupied. Absurd, right? Why can’t metallurgy or light industry do the same? Yet, they had this opportunity for years, while a well-known company in this field received subsidies for years, allowing it to expand to a global scale—all while paying taxes as if it were a small farmer growing wheat. It was tough to eliminate this amendment because there was significant opposition, and many proposals were put forward. This is just one example. There was also the iron ore tax and the environmental tax. If I’m not mistaken, the environmental tax was increased tenfold, which metal producers opposed. The ore royalty rates were also revised. This bill managed to unite big capital against it because they couldn’t understand how to live without their usual “sweet perks”—those little advantageous tweaks they had previously managed to include in the Tax Code, most of which we have removed over the past five years.
VICTOR:
So you took away their “sweet perks,” which essentially meant that they didn’t pay taxes on general terms but enjoyed privileges compared to others, allowing them to grow their businesses and so on?
DANYLO:
That’s always been a feature of our tax legislation. While small businesses avoided taxes through schemes with sole proprietorships and simplified taxation, large and super-large businesses managed to lobby for tiny norms in the Tax Code—norms that seemed insignificant at first glance but actually saved them billions by allowing them not to pay taxes legally. One of the major focuses of our work from day one has been to eliminate all of that.
One of the latest changes that didn’t pass was the elimination of the VAT zero-rate privilege for enterprises created by organizations of people with disabilities. Everyone in the country knew this was a scheme—a few families monopolized the protection of people with disabilities, creating and selling these companies, supposedly employing disabled people while using the VAT refund for illegal enrichment. This privilege lasted for quite some time, and it took considerable effort to eliminate it, but it finally expired on January 1, 2025. That’s just one example, and believe me, there were many similar cases.
VICTOR:
Have you calculated, or do you have an approximate total amount of how much economically unjust taxation you’ve managed to eliminate?
DANYLO:
We’re talking billions. We can discuss each exemption individually. One of the first bills passed by our committee equalized the tax rates for heated tobacco products (HTPs) and filtered cigarettes. The difference between the rates was a staggering 320%! Just think about it—320%! The impact of equalizing these rates is 30 billion for the budget over the period it’s been in effect. It was a classic lobbying move, and we got rid of it. For a long time, there was also a privilege for the metallurgical sector and mining and processing plants (GZK), allowing them to offset profit tax with the excise duty on fuel used by their machinery, as long as those machines didn’t drive on public roads. That’s a billion per year. Is it a lot or a little? Maybe not that much, but just a tiny amendment made a billion in difference—understand? We’ve done quite a lot of that. We’ve cleared out everything that had been written into the code over the years—tiny clauses, minor provisions—and I think we’ve more or less ensured tax equality.
On Shadow Tobacco Market Schemes
VIKTOR
You mentioned tobacco. Last year, the de-shadowing of the alcohol market brought in nearly 2 billion. The reduction of the illegal or black tobacco market last year— from 26% to almost 13%— was cut in half. Consequently, tax and excise revenues increased by 16 billion. I understand that this is the work of the entire Committee team, not just the members of parliament but also the secretariat. You also mentioned that almost 29 violations were detected involving cash register manipulation amounting to 29 billion UAH. Could you explain what these violations are?
DANYLO
What do you mean exactly?
VIKTOR
It was stated in your quote: “Large-scale income legalization schemes involving cash register manipulation amounting to 29 billion UAH were identified.”
DANYLO
Let’s take a step back. I don’t want to attribute all the credit to the Committee. In reality, it’s the tax authorities and law enforcement agencies who did a good job with tobacco in 2024. That’s the truth. I would really like these trends to continue despite changes in leadership, so we don’t experience a rollback. Unfortunately, this market is very complex, highly prone to corruption, and incredibly lucrative— there’s a lot of shadow money circulating. That makes it much more complicated than the alcohol market, where we managed to triple the production of legal alcohol during the war.
VIKTOR
What makes it more complicated?
DANYLO
There’s simply more money involved. When we talk about vodka, it brings in about 10–12 billion UAH in annual revenue. But when we talk about tobacco, it’s 90–100 billion UAH. So, if you create a 10% shadow market for tobacco, that already equals the entire vodka market. The temptation is much higher, and shadow operators have significantly greater opportunities. They can corrupt entire clans within law enforcement and tax authorities, making it much harder to maintain control.
When it comes to the schemes you’re referring to— money laundering through illegal means— it usually involves retail companies selling tobacco products. They report cash as if it was earned from tobacco sales, which doesn’t entail VAT and thus doesn’t lead to paying taxes. There’s also a situation in the market where non-cash funds may be more expensive than cash.
VIKTOR
In simpler terms, for those who are not familiar with these schemes, how does it work?
DANYLO
Let’s say I have cash that I received illegally— I don’t know, maybe from drugs or committing a crime. I need legitimate money that I can spend, invest in business, or even pay dividends with. So, I approach you, knowing you run a business that handles cash…
VIKTOR
Like a large network of kiosks, for example.
DANYLO
Exactly. I ask you to pretend you sold a certain amount of product, record the cash as revenue, and somehow transfer it to my companies or do something else with it. This is a classic money laundering scheme involving illicit funds. The tax authorities forwarded the documents related to this scheme to the Bureau of Economic Security in mid-2024.
VIKTOR
So, the tax authorities and your Committee know the key players, right?
DANYLO
Yes.
VIKTOR
Are there any ongoing efforts to stop illegal activities and transition them into legal business operations? There’s been a lot of talk about how the tax authorities and BES (Bureau of Economic Security) don’t work effectively…
DANYLO
What do you mean by attempts if we have results? These aren’t just attempts— they are actions. We are all adults here. Trying to appeal to someone’s conscience is just self-deception.
VIKTOR
Did you try it anyway?
DANYLO
People know exactly what they are doing. Yes, I did communicate with some well-known tobacco market players. Especially at the beginning of the full-scale invasion, when the revenue situation was dire. It wasn’t just about them— I personally communicated with major taxpayers. We used different approaches: sometimes asking, sometimes demanding, sometimes having other conversations, but always requesting them to pay taxes. Back in March— early, mid, and even late March— we didn’t know what would happen with the budget. At that time, our only funds were from the National Bank reserves, which were critically low. It was a very dangerous situation. Collecting taxes from previous periods was literally a matter of survival.
Many companies, understanding their obligations, paid their taxes to the budget. Some held back, but most took a responsible stance. I remember having some tough conversations with one of the owners of a large tobacco distribution network, who delayed paying hundreds of millions in VAT obligations declared for January until April.
VIKTOR
What was his reasoning?
DANYLO
Bad situation— partners aren’t paying, contractors aren’t paying…
Eventually, taxes were paid. The turning point was when it became clear that we would not collapse, especially with the situation stabilizing at the front line and with incoming support. These conversations took place. To maintain the situation, I indeed communicated with anyone necessary.
VIKTOR
Was there anyone who categorically refused?
DANYLO
I just told you about one such case.
VIKTOR
But in the end, that person paid, right?
DANYLO
Yes, everyone paid. They didn’t really have a choice. Once it became clear that we were moving forward, that support was coming, and that Ukraine definitely had a future, they understood they wouldn’t lose their business, and sooner or later, someone would come to collect. Unfortunately, the approach among tobacco companies varied greatly. For example, international companies— I’m not sure if I should name them— but “Philip Morris” paid taxes in advance, literally ahead of time. In contrast, domestic producers held back, waiting to see what would happen to the country.
VICTOR
Yes, I remember that period very well. Especially when I started researching it: what happened in the early days, in the first months of the full-scale invasion. I think we should dedicate a separate series of discussions to this. It would definitely be interesting. We need to record it so that all these facts become part of history.
DANYLO
I’ll let you in on a little secret—I actually already have a book written. The first year and a half of the war in detail, with numbers, decisions, and everything else. But I haven’t published it because it includes names, and I think it might be a bit too early. It could have a public impact.
"We worked 24/7 to keep the economy afloat"
VICTOR
Let me go back to the idea that the role of the Committee Chair is to find a balance between ensuring funds to finance the army, supporting the economy, and maintaining social justice. How would you assess your success in finding and maintaining that balance during this extremely challenging period, especially during the full-scale war?
DANYLO
Of course, I would have liked to succeed entirely, but there were also mistakes.
Let’s be honest—no one had a manual for running a country during a war. Nobody really knew what to do. We calculated different scenarios, but until the very end, we didn’t believe there would be a full-scale invasion. Maybe some escalation in the east, perhaps something else… But no one anticipated that Kyiv would be under threat or that the aggression would be on such a horrific scale. The reality that confronted us was so overwhelming that we didn’t allow ourselves to believe it. Although we did take necessary measures—like moving documents and other things that would be done if we were preparing for aggression. Yet, many of the decisions we made carried a lot of risk.
Classically, if a country is at war, you have to raise taxes. That’s the first thing to do because you need to accumulate as much as possible to repel the enemy and acquire everything necessary for the country. In Ancient Greece, they had a war tax collected specifically for military needs. Even in the absence of direct taxes, it was a direct levy on citizens of Greek city-states to fund war efforts. The United States introduced a “victory tax” of 5%. By the way, it was a full analogue of our military levy. They almost doubled the corporate tax rate, introduced a tax on war profits (similar to what we did with banks), and increased the number of income tax payers from 4 million to 43 million. This approach was followed by all countries—look at Israel or Great Britain during World War II. So, classically, that’s how it should have been done. We did things differently.
This was the president’s decision. There were many different arguments and discussions around it. I fully supported it, and I don’t regret implementing the 2% tax, which helped pull the economy out of shock. In the first weeks of the war, the primary threat to the economy was not destruction or external factors, but panic and shock. To get out of shock, we needed radical, decisive actions that gave businesses a clear signal that we were working and removing all obstacles even remotely related to the war. That’s why we decided to cancel fines, halt inspections, and automatically extend all licenses and permits until the end of martial law, along with introducing the 2% tax. This allowed us to get the economy out of shock, and I believe it was the right decision.
A mistake, without a doubt, was the abolition of import taxes. We lost budget revenues and dealt a significant blow to domestic manufacturers who became uncompetitive. This decision was reversed quite quickly, already by summer, but it had caused damage. Similarly, with fuel excise duties—it probably shouldn’t have been done. It didn’t have a positive impact on the fuel market. The shortage that occurred in the first months of the war wasn’t due to price; other factors caused the deficit.
VICTOR
The lack of fuel?
DANYLO
Yes, the lack of fuel. It wasn’t a matter of excise duties; it was about the physical absence of fuel. Until new logistics chains were established, the issue remained unresolved. Later, it was resolved independently of taxes, and it turned out that the difference—the tax margin—ended up in the pockets of oil traders. I think that decision was also a mistake.
But speaking about our general policy—not just taxes—we ensured 100% deposit return during martial law. This significantly contributed to deposit growth during the war, regardless of military actions or risks. People trust the banking system. We managed to keep the banking system and the payment system stable. I remember how, in the early days, we faced the issue of paying pensions in Kharkiv. It was a catastrophic problem, and it was solved jointly with the military, the National Bank, and individual banks. Not everyone wanted to cooperate—far from it. Ensuring cash delivery to ATMs was a critical challenge, even in Kyiv, let alone in regions just a few kilometers away from active military operations. It was a matter of life and death because if you’re a pensioner and your only income is your pension, and you can’t access it—you could starve to death.
VICTOR
We should probably thank the supermarket chains that allowed people to exchange non-cash for cash back then.
DANYLO
By the way, that was also our decision. It was made into law even before the war—not in anticipation of war, of course, but it turned out to be crucial. Initially, they were cautious about it, but after the National Bank worked with them, they started issuing cash through store registers on a massive scale. I’m very grateful to the Ministry of Finance team and the National Bank team. At that time, Shevchenko was the Head of the National Bank. We worked 24/7. It wasn’t like you’d call the Prime Minister or the Minister of Finance at 3 a.m., and they wouldn’t answer because they were asleep. The intensity was so high, but maybe no one’s interested in that anymore…
VICTOR
On the contrary! It’s really interesting. It’s important to remember that thanks to civil servants and politicians, this state also stood firm because they ensured that our soldiers at the front had funding, equipment, and the ability to defend the country.
DANYLO
It’s taken for granted. Maybe that’s how it should be. They were in the right place and made far fewer mistakes than they could have. But imagine, please, the hryvnia “floating away.” That’s an issue comparable to the loss of territory. It’s the foundation of the state’s national security. And the fact that the hryvnia held its ground… it held thanks to unpopular but very timely and correct decisions by the National Bank: restrictions on currency payments, bank reserves, refinancing commercial banks without limitations, despite having small gold and foreign currency reserves. Yet they made those decisions and made them on time. We discussed all these issues back then. Holding the hryvnia, maintaining the banking system, the payment system, the tax system — I think that laid the foundation for our further resilience.
Why is signing the excise tax amendments being delayed?
VICTOR
Trust. People trusted the finances. Accordingly, they understood that there was stability and a state. The last question on the topic of taxes is about the National Revenue Strategy. The Ministry of Finance developed it as one of the requirements of our international partners. It was adopted quite strangely, without broad consultations. Although, in this case, I absolutely agree. I know that the people responsible for drafting it are quite professional. The maximum involvement of the expert community at that time could have led to the adoption of tax bills as usual: noise, unconstructive discussion, and possibly defending some of those “sweet perks” that the business sector lost. But what interests me more in this case is the recently adopted bill — 1190 — on excise taxes on tobacco products. Difficult or not, it was passed. Not signed. Yaroslav Zheleznyak, your colleague, counts every day how much the budget has actually lost due to the president not signing this bill. Tell me, please, have you had a conversation with the president about why he hasn’t signed it?
DANYLO
First of all, this issue probably doesn’t concern me at all. I mean, signing this bill is purely a matter for the President’s Office. I haven’t spoken to him about it. And I would say that the events of the last month and a half, or maybe even a bit longer, in big politics and international politics, have likely concentrated his attention only on the most critical issues on which we all depend, and the entire country as well. Maybe he just hasn’t gotten around to this bill yet, which is why it hasn’t been signed. But I am convinced it should be signed. It should be signed as soon as possible because we are indeed losing out. I might not completely agree with Yaroslav’s calculations, as he calculates linearly — just takes the annual expected revenue and divides it by the number of days. But revenues are not linear, and in January and February, they are lower because cigarette manufacturers purchase excise stamps at the end of the year under the old excise rate, and therefore they buy fewer excise stamps in January and February. But losses are definitely there, and they are calculated in tens of millions of hryvnias.
VICTOR
Does it offend you that the Committee and the Verkhovna Rada did their job, but the president didn’t sign it? Is there any sense of that?
DANYLO
It’s not a matter of offense or feelings. It’s a legislative process that must go on. I just don’t understand the origins of this process that somehow got delayed. As for offense — absolutely not.
VICTOR
Okay, the budget.
DANYLO
Let’s go.
"I criticize the budget, but I do it constructively"
VIKTOR:
One of your speeches took place just 9 hours before Russia’s full-scale invasion, on February 23, 2022, when you advocated for increasing spending on the security and defense sector. What were your feelings at that time? Did you know that a full-scale war was imminent? Especially considering the political debates about who would introduce the bill to increase spending on military payments and military expenditures.
DANYLO:
Did we know? As I’ve already mentioned, there were signals—embassies were being evacuated. We understood that they couldn’t just do that without reason. But still, reality didn’t want to accept it. I’m speaking purely from a human perspective. But we had to do everything necessary. That’s why the debate with the opposition didn’t start on February 23—it started a bit earlier and periodically arose. They always manipulated military spending. For them, introducing a bill to add another 50 billion to the army—without identifying sources, by the way—was typical. This is very characteristic of our opposition. Then they would speculate: “Look, we wanted to allocate 50 billion, but you didn’t pass the budget changes, so we are patriots, and you are not.” This is very typical of them.
This debate flared up again because they introduced another bill to add 50 billion to the army. We did not dismiss it. We held consultations and meetings with the Minister of Finance and the Minister of Defense, who at that time was Reznikov. We gathered them and clearly communicated: “Please tell us, Mr. Minister of Defense, how much you need. Mr. Minister of Finance, please indicate which budget items to cut to reallocate funds, and we will do it.” At that point, they made a clear statement that 20 billion was needed, and the corresponding bill was voted on and supported by everyone—over 300 votes, if I remember correctly. It was an absolutely normal process when a need formulated by the Ministry of Defense was met by the Verkhovna Rada.
As for the decisions made along with that, we granted the Cabinet of Ministers the right to transfer funds from expenditure items to the Reserve Fund with the agreement of the Supreme Commander-in-Chief and use them for security and defense without any restrictions. In other words, we gave such authority so that the Cabinet could use the money without needing approval from the Verkhovna Rada, not even from the budget committee. I believe that was absolutely the right decision. We allowed manual control over funds and the budget, granting such powers to the Cabinet of Ministers and the Ministry of Finance. It was the right move because it resolved many issues.
VIKTOR:
Let me remind our viewers and listeners that at that time, in March, the Ministry of Finance cut almost all capital expenditures, took away all non-core expenses, concentrated them in the Reserve Fund, and started distributing from that reserve. While preparing for our conversation, I reviewed all your speeches on the budget bill. I see that as a team player and a coalition member, you consistently support the government regarding the budget. That makes sense. I usually tell my students that the budget is essentially manipulation. On one side, there is the government and coalition, and on the other side, the opposition, and each manipulates where it suits them. When you speak about the budget in your speeches, do you do so because you genuinely believe that the Ministry of Finance has developed an ideal bill that is right at the moment, or because you feel that as a coalition team member, you have to say that?
DANYLO:
Firstly, I do belong to the team—no doubt about it—and to the coalition, that’s true. But look at my amendments. I criticize the budget—that’s also true. But unlike the opposition, I do it constructively. Our old parliamentary practice (by the way, it’s not just ours; it’s like that worldwide) involves throwing in countless amendments worth trillions and then voicing those amendments, bargaining somehow… Let me clarify: bargaining can be corrupt, but I’m not talking about corruption right now. Why? Because the budget is the quintessence, the concentration of the political process.
If you are, say, a “green” party member—not “Servant of the People,” but an environmentalist party—you enter the parliament, and people vote for you to support environmental programs. You are obliged to advocate for environmental programs in the budget and do everything—block, file amendments, demand that these programs be expanded—because that is your promise to voters. And that’s normal. If you advocate for the interests of large industries, you do the same. Or if you are a majoritarian representative. For a long time, we had a rather ambiguous instrument called “social and economic development funds,” where you defended these funds to bring money to your district for certain programs. It doesn’t necessarily mean you would steal the money. It could mean building playgrounds and getting a plus from voters for showing care. That’s normal. You’re a politician—you should do this because the budget is the essence of this political process. Through the budget, those programs and powers that will take place in the future are implemented.
When I analyze the budget with my team, I follow several principles. Firstly, realism. We can talk about massive business support or increasing social spending, raising pensions, for instance. We can discuss it, but it’s irresponsible because we understand that there’s no money for it. I did publicly criticize the 2024 budget for freezing social standards, and it deeply upset me, but on the other hand, I understand that there’s no alternative. There’s no money. What else can we do? Print more and make things even worse? No, we won’t do that. So, realism is key.
Secondly, balance. This is probably less relevant during martial law since the absolute priority is the army, security, and defense. But if we’re talking about peacetime, we definitely need to find a balance between the interests of various social groups within the budget. This is crucial to ensure that we don’t forget those who are less represented or those whose interests are less lobbied due to political circumstances.
And consistency and effectiveness. When we make amendments to the budget and demand something, we should look at how the government utilized funds for these programs in the previous period. Therefore, budget work should begin not with its submission to the Verkhovna Rada but with the report for the previous year. When the Cabinet of Ministers sends the spring or autumn report, we need to analyze how effectively the budget funds were used and based on that, build the budget for the next period.
VICTOR
Minister’s Dismissal
DANYLO
Yes! I believe that’s the only way. But unfortunately, it’s not practiced here. That’s wrong.
VICTOR
That’s wrong, I agree with you.
DANYLO
Coming back to taxes. The problem in our country is not about the tax rates or even the share of GDP redistribution through the budget. The problem lies in the inefficiency of using the funds we collect. For example, in Haiti, the percentage of GDP redistribution through the budget is about 5%, while in Norway, it’s around 50%. Yet, investments flow into Norway, where the money is efficiently used for social services, education, healthcare, roads, infrastructure, and ensuring the rule of law. Meanwhile, in Haiti, where there are practically no taxes, there’s still a lack of infrastructure and, overall… the money is not used efficiently—they are simply stolen. I don’t mean to speak poorly of Haiti, but something tells me that there are certain nuances—things are not good there, much worse than in Norway. Therefore, this aspect of efficient use of funds is fundamental in budget planning.
About Battles in Parliamentary Chats
VICTOR
How can deputies control and assess effectiveness?
DANYLO
There are plenty of ways to do that—starting from parliamentary inquiries to hearings, even at committee meetings. If your committee is responsible for environmental policy, go ahead—summon the minister, invite the relevant deputy minister from the Ministry of Finance, analyze any budget program, ask questions—why not? Draw conclusions and register a motion to dismiss the minister.
VICTOR
So the question is: why isn’t this being done?
DANYLO
We do it. In our Committee, we do it. Although we are mainly responsible for revenue, we still analyze the activities of all the agencies under our jurisdiction.
VICTOR
I’ve had the opportunity to see it from the inside. I can confirm that it’s a tough talk for the heads of these agencies.
Returning to your budget proposals: in 2024, you submitted over 70 proposals to reduce expenditures, mainly related to public sector wages. Let me remind our listeners that the Ministry of Finance was introducing a new grading system at the time, which was supposed to regulate salary payments. Why did you cut civil servants’ salaries—do you just not like them?
DANYLO
It’s not about feelings. It’s about efficiency—again, what we’ve been talking about. Despite the grading system (which I generally support but which hasn’t worked—let’s be honest), there are still significant differences in salaries for civil servants within ministries, even when they perform the same functions.
Take, for instance, the notorious CRAIL (Commission for Regulation of Gambling and Lotteries) or the National Securities and Stock Market Commission—both have average salaries of over 100,000 UAH (I don’t remember the exact figures—109,000 for one and 115,000 for the other—but definitely more than 100,000), according to the Ministry of Finance dashboard. Compare that with the Ministry of Energy or the Infrastructure Agency (formerly Avtodor), where the average salary is 44,000–48,000 UAH. Why? Do we assume that they have some additional income, so we don’t pay them as much?
And it’s not just the Securities and Stock Market Commission—many other institutions are affected. For example, the Cultural Heritage Agency reportedly has the highest average salary—over 120,000 UAH. There’s no reasonable explanation for this. Until we standardize salaries, decisions to raise wages in certain institutions will be based on personal connections rather than logic and fair distribution.
VICTOR
Then we should start with the Verkhovna Rada. Let’s mention that secretariat employees weren’t subject to grading.
DANYLO
Now they are.
VICTOR
Yes, now they are. But earlier they weren’t, and they had some of the highest salaries…
DANYLO
Not anymore. But there are still some unique positions—individuals who receive…
VICTOR
…several million.
DANYLO
…outrageous salaries. And that really annoys the deputies. You can’t imagine the battles that take place in our chat groups regarding the salaries of specific officials in the Verkhovna Rada. Deputies are genuinely outraged—it’s a whole separate conversation. Maybe someday someone will leak these discussions to the press, but there’s a lot of frustration because these officials earn 10 times more than the deputies themselves. It’s quite disturbing. I agree that it’s not just a problem of equality but also of efficiency. Have you ever heard about budget expenses for state administration? Each ministry has a separate program for state…
VICTOR
…leadership and management.
DANYLO
It’s the maintenance of that ministry. Have we ever heard of any KPIs evaluating the effectiveness of spending these funds? For example, the Ministry of Economy has 308 functions. Have we ever heard that a specific function led to GDP growth of 0.01%? No one analyzes this at all.
VICTOR
We’re diving into a very dangerous topic here.
DANYLO
But if we did dive into it—and if our colleagues involved in public administration reform also did—we wouldn’t be getting a score of 2 out of 5 from the European Commission regarding public administration reform.
"The way the Committee works now, it has never worked like this in any previous convocation in this country"
VICTOR
Considering today’s episode is about taxes, how much did you pay in taxes last year?
DANYLO
190,000 UAH.
VICTOR
It’s really important for every person to know how much they pay in taxes. Why? Because when you know the amount, you have the right to demand from a public official…
DANYLO
…you’re quoting my own words: “How much does this state cost you?” Exactly!
VICTOR
Exactly!
What are your top three disappointments as a member of parliament?
DANYLO
I wouldn’t call them disappointments because the word “disappointment” implies passivity — as if you’re sitting on the sidelines and just feeling let down. I’d rather talk about failures. For example, things that didn’t work out but became lessons, and we’re still trying to address them. The Economic Security Bureau — the first iteration. We thought that once we passed the law, the tax police would disappear the next day, but it just turned into a rebranding exercise. Now we’re forced to relaunch the Bureau for the second time. The same goes for KRAIL and the gambling industry — a collegial body that completely failed its tasks, didn’t launch the online monitoring system, and will be liquidated precisely because it didn’t fulfill its responsibilities. That’s also our failure. I don’t separate political responsibility here — we can’t do that.
Another one is the National Securities and Stock Market Commission, which essentially failed to establish a functioning stock market and got embroiled in scandals — from the well-known “Freedom Finance” story to controversial business trips abroad. These are real failures that we’re now trying to fix. As for the stock market, that might be left for our successors to handle.
VICTOR
Let’s end on a positive note. What are your top three achievements as a member of parliament or as the head of the Committee?
DANYLO
If we’re talking about achievements, we’d need another episode. I could go on about them endlessly.
VICTOR
We’ll arrange a special episode.
DANYLO
There are more than 30 real reforms. I firmly believe — and it’s not just my opinion but the opinion of experts — that this convocation of the Committee has done more in terms of reform than any previous one. We completely reformed customs legislation, financial legislation, tax legislation — around 70%. We carried out large-scale reforms, and each one could be discussed for hours.
VICTOR
Top three?
DANYLO
Top one: I believe our greatest achievement is the way the Committee works. It has never operated like this in any previous convocation. I don’t mean to undermine other parliamentary committees, but I feel that not many work as transparently and inclusively as we do — openly discussing any issue live, making real decisions with the involvement of businesses, experts, and the public, without any restrictions.
And certainly, in this Committee, in this Parliament, throughout history, there has never been a tax committee where you couldn’t push through a self-serving amendment for money, relationships, favors, or any other means to lobby for something against the state’s interests. That’s why I’m so grateful to my colleagues for their support and for raising the Committee’s standards so high that I believe it will be challenging for our successors to step away from them.
VICTOR
I want to thank you for your time, for this wonderful and pleasant conversation, and on behalf of civil society, thank you for the work you do in the Committee — openly and with maximum public involvement. The only limitation you have is the number of participants. People really want to join but can’t.
DANYLO
Let me comment on that. I personally pay for Zoom. It’s my own Zoom account, and the maximum number of participants is 100. Upgrading to 300 participants costs $2,000 per year, which is already a significant amount for me. So the $170 I pay determines the current limit.
VICTOR
Thank you.
DANYLO
Thank you.
This episode was translated from Ukrainian and adapted into English with the help of artificial intelligence. The text has been reviewed to preserve the meaning and natural flow of the conversation.