Ukraine Ministry of Finance Strategic Plan 2018-2021

To achieve the results in the medium term, the Ministry of Finance of Ukraine
identified the following key priorities:
Effective
budgeting
further implementation of the
medium-term budgeting
strengthening control over the
implementation of the
state budget
regular review of budget
expenditures (initially - on a
pilot basis, and then on a
permanent basis)
Macroeconomic
stability and fiscal risks
reduction
fiscal consolidation for further
state budget deficit reducing
completion of the assessment and
debt management reform
Economic
growth
support
tax and customs reforms
reducing the pressure on
fair business taxpayers
foreign investors engagement to Ukraine
involvement of the Ukrainian business in
public investment and international
infrastructure projects
corporate governance
in state-owned banks
Decentralization
Further development of
the regions
-
increasing the financial capacity
of the regions

Oksana Markarova,
Minister of Finance of Ukraine
“Public Finance is nothing else than
a sophisticated discussion of the relationship
between the individual and the state.”
Vaclav Klaus,
President of the Czech Republic, 2003-2013
There is a reason for comparing Public Finances
with the blood circulation system. If everything functions
properly - the organism is healthy and able to continue
its growth and development. If the blood test shows some
disbalance, it indicates that there are some problems in
other parts of the organism. But if the blood system itself is
affected, then the whole organism suffers.
To establish a system for providing the best use
of national economy and world markets resources for
ensuring the sustainability and economic growth in favor
of Ukrainian people is indeed the task of the Ministry
of Finance as a state agency responsible for the public
finance management.
As a public authority, we have all the required
tools, standardized approaches, and policies to ensure
the fulfillment of this task. Therefore, at this stage, I see four
major priorities for us to achieve.
First of all, we should ensure the effective budgeting.
Timely and complete financing of the government’s
priority initiatives and key reforms, in such spheres as a defense, social security, healthcare, and
education, depends on the budget’s quality. The control over the budget deficit is a guarantee for
further cooperation with international partners and creditors. This is critically important while so many
reforms are implemented in Ukraine today.
That is why we are returning to medium-term budgeting, because it will allow us to plan the
priorities of the state policy sustainably and responsibly, and to form realistic and well-balanced budgets,
taking into account the existing capacity of the economy. This is one of the major reforms that we are
currently implementing in public finance, and it will have a great impact on how Ukraine manages its
financial resources.
Also, we will regularly review budget expenditures: at first - on a pilot and, then on a permanent
basis. This will help us to ensure a consistent budget policy and budget discipline.
Our second priority is macroeconomic stability and fiscal risks reduction. To cut down the budget
deficit, the Ministry of Finance is conducting fiscal consolidation. Our target is to establish the deficit limit
level at no less than 2% of GDP by 2020. We have already ensured the deficit reduce by 2.3% of GDP in
this year’s draft budget.
Besides, we are committed at completing the reform of debt assessment and the public debt
management reform. Our goal is to reduce the ratio of public debt to 46% of GDP by the end of 2021.
A steady reduction of public debt will have a positive effect on developing cooperation with the IMF
under the new program, which is currently being approved.
The next priority is to support economic growth. First of all, by creating the conditions and
reducing the pressure on fully tax complied business. We are currently working on the State Fiscal
Service reform concept that will be focused on tax and customs spheres, with the view to improve their
management and help to simplify the administration of taxes and duties. We should emphasize the
importance of foreign investors’ engagement to Ukraine and encouraging the national businesses to
participate in investments and international infrastructure projects.
Building a strong economy without a reliable banking sector is impossible. A significant part of
the banking sector currently is owned by the state. Therefore the introduction of corporate governance
in state-owned banks is a crucial part of our strategy. This will significantly improve the efficiency of
management, restore their stability and profitability as financial institutions operating on a commercial
basis, and to reduce the state presence in the banking sector in the future.
Finally, the budget decentralization remains our top priority, which aims to increase the financial
capacity of the regions and encourage their further development. By improving the inter-budgetary
relations, we will assure an efficient allocation of resources while formulating the state budget policy.
Our priorities are a direction, and the Strategic Plan of the Ministry’s activities for the next three
years is a roadmap. We will discuss it with our key partners and update it every year.
The coherent and effective work on the implementation of the Strategic Plan will ensure the
financial stability and establish the sustainable budget policy that will enable the effective functioning
of the state and accelerate the economic growth.

STRATEGIC PLAN
2018-2021
The strategic plan has been published with the support of the Governments of Germany and the United
Kingdom via the project " Good Financial Governance " implemented by the federal company
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.
The views or statements expressed in the document do not necessarily reflect the official position of the
Government of Germany or the Government of the UK.
All information in this document is indicated in accordance with the order of the Ministry of Finance
of Ukraine "On Approval of the Strategic Plan of the Ministry of Finance of Ukraine for 2018-2021 years"

CONTENTS
1. Mission and policy areas of the Ministry of Finance of Ukraine 6
2. Dynamics of the key budget indicators in 2014–2018 10
3. Strategic goals and objectives of the Ministry of Finance of
Ukraine in 2018–2021 12
4. Analysis of the current situation in activity area according
to the defined strategic goals and objectives 2018–2021:
4.1. Strategic goal No. 1. Increasing the efficiency of
allocation and use of the budget funds 15
4.2. Strategic goal No. 2. Transparent, effective, fair tax
and customs systems that contribute to economic
development and comply with the EU standards 36
4.3. Strategic goal No. 3. Financial system ensuring
support for macroeconomic stability, effective
financial monitoring and use of resources for
economic development 43
5. Strategic goals, objectives and quantitative outcome
indicators of the implementation 54
6. Activities aimed at implementation of the objectives and
achievement of the strategic goals 62
7. Budget programs aimed at financial support for achievement
of the strategic goals, implementation of the objectives
and activities 80

CHAPTER 1
MISSION AND POLICY AREAS OF
THE MINISTRY OF FINANCE OF
UKRAINE

STRATEGIC PLAN OF THE MINISTRY OF FINANCE OF
UKRAINE 2018–2021
9
The mission of the Ministry of Finance of Ukraine is to provide the financial support for state
functions performance on the basis of ensuring the formation and implementation of well-balanced
financial, fiscal and budget policies, creating conditions for stable economic development by ensuring
stability of the financial system and management of public finances on the principles of balance,
efficiency, impartiality, integrity, sustainability and transparency.
The Ministry of Finance of Ukraine is responsible for
the state policy key areas formation and implementation:
Debt policy
Debt sustainability assurance,
government debt management
and government guaranteed debt
Budgetary policy
Assurance of predictability,
transparency and balance of
budgetary policy in the
medium term and
allocation of resources in
accordance with the
state development
priorities
Tax and Customs
policy
Establishment of modern
fair tax and customs
system that ensures
achievement of the
strategic goals of
sustainable economic
development
Financial policy in the
following areas
Assurance of the
effective cooperation
on the financial matters
with international
financial organizations,
foreign states and banks;
participation in state
policy formation of
the financial services
market and state-
owned banks sector
development

UKRAINE 2018–2021
10
The Ministry of Finance of Ukraine is the main body in the system of central executive authorities
that ensures the state policy formation and implementation in the areas of:
 state assaying control
 accounting
 lotteries regulation
 monitoring of the budget legislation compliance
 state internal financial control
 treasury service of the budget funds
 money laundering prevention and counteraction or terrorism financing
 administration of the social security contribution
 combating the offenses during application of tax and customs legislation
 legislation on payment of the social security contribution
 mining, production, use, storage and circulation monitoring of the precious metals and precious
stones, organogenic precious stones and semi-precious stones
 organization and control over the manufacturing of securities and strict accounting documents
The Minister of Finance of Ukraine
directs and coordinates the activities of:
the State Fiscal
Service of
Ukraine
the State Financial
Monitoring Service of
Ukraine
the State Treasury
Service of
Ukraine

CHAPTER 2
DYNAMICS OF THE KEY
BUDGET INDICATORS IN
2014–2018

UKRAINE 2018–2021
13
In recent years, the fiscal policy was aimed at consistent implementation of fiscal consolidation
according to the IMF program, which allowed reducing the state budget deficit to 1.6% of GDP at year-
end 2017. Following the results of 2017, it also became possible to reduce significantly the public debt
level relating to GDP ratio.
At the same time, raising social standards and strengthening the budgetary support of investment
activity in the country, primarily due to increased capital expenditures, contributed to recovery of
economic activity in the country.
Indicator
Key budget indicators in 2014–2018
State budget revenues
Percentage of tax revenue
within the structure of state
budget revenues
State budget
expenditures
Percentage of capital
expenditure within the structure
of state budget revenues
State budget deficit
Public debt
Public debt management
Unit
measure
bln UAH
% of GDP
% of total
volume
bln UAH
% of GDP
% of total
volume
% of GDP
% of GDP
% of GDP
2014
357,1
22,5
78,5
430,2
27,1
1,7
4,9
59,7
3,0
2015
534,7
26,9
76,6
576,9
29,0
3,0
2,3
67,1
4,2
2016
616,3
25,8
81,8
684,9
28,7
3,9
2,9
69,2
4,0
2017
793,4
26,6
79,0
839,5
28,1
4,9
1,6
61,5
3,7
For reference: key macroeconomic indicators in 2014–2018
GDP
Consumer price index,
December to December of the
previous year
Change in real wages
Minimum wages (at the
year-end)
UAH to USD official exchange
rate (average)
bln UAH
Real
change, %
%
% to previous
year
UAH
UAH/USD
1 586,9
-6,6
124,9
-6,5
1218
11,89
1 988,5
-9,8
143,3
-20,2
1378
21,84
2 385,4
2,4
112,4
9,0
1600
25,55
2 982,9
2,5
113,7
19,1
3200
26,60
2018
917,9
27,5
82,8
991,7
29,8
4,3
2,4
60
3,9
3 332,3 **
3,0 **
109,0 **
9,6 **,***
3723 **
29,3 **
* Budget parameters for 2018 are given in accordance with the Law of Ukraine “On the State Budget of Ukraine for 2018”.

** Projected macroeconomic indicators that were taken into account in the budget calculations for 2018. Approved by the
resolution of the Cabinet of Ministers of Ukraine # 906 dated 01.12.2017

*** Average monthly salary of employees (gross), adjusted for the consumer price index, as a percentage of the previous year.

CHAPTER 3
STRATEGIC GOALS AND
OBJECTIVES OF THE
MINISTRY OF FINANCE OF
UKRAINE IN 2018–2021

UKRAINE 2018–2021
15
Strategic Plan
objectives for
2018-2021
Public Finance
Management
System Reform Strategy
2017-2020
The
Government’s
Medium-Term
Priority Action
Plan to 2020
Association
Agreement
with the EU
Sustainable
Development
Strategy
“Ukraine - 2020”
Strategic Documents
Strategic goal 1. Improvement of the effectiveness of budget funds allocation and use
Strategic goal 3. Financial system that supporting the macroeconomic stability, effective financial monitoring and use of
resources for economic development
Objective 3.1. Budget balance and debt
security
Objective 3.2. Effective and transparent
cooperation with the international financial
institutions (IFIs)
Objective 3.3. Competitiveness and
efficiency of the state-owned banks
Objective 3.4. Formation and
implementation of the policy on anti-
money laundering and combating the
financing of terrorism
Objective 1.1. Implementation of medium-
term budget planning
Objective 1.2. Development of program-
oriented method in the budget process
Objective 1.3. Effective fiscal risk
management
Objective 1.4. Verification of government
social payments
Objective 1.5. Development of state
internal financial control
Objective 1.6. Accounting and audit
reforming
Objective 1.7. Improvement of inter-
budget relations
Objective 1.8. Enhancement of budget
transparency
Objective 1.9. Enhancement of institutional
capacity of the Ministry of Finance of
Ukraine
Objective 1.10. SFS’ databases monitoring
and control
Objective 1.11. Implementation of a new
model of healthcare system financing
Objective 1.12. Enhancement of
expenditure planning transparency for
higher education
Objective 1.13. Monetization of subsidies at
the household level
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Strategic goal 2. Transparent, effective, fair tax and customs systems that contribute to economic development and
comply with the EU standards
Objective 2.1. Improvement of the
effectiveness of tax system efficiency,
stability and predictability
Objective 2.2. Tax base extension
Objective 2.3. Improvement of customs
performance efficiency
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CHAPTER 4
ANALYSIS OF THE CURRENT
SITUATION IN ACTIVITY AREA
ACCORDING TO THE DEFINED
STRATEGIC GOALS AND
OBJECTIVES 2018–2021

UKRAINE 2018–2021
17
4.1. STRATEGIC GOAL NO. 1
IMPROVEMENT OF THE EFFECTIVENESS OF ALLOCATION AND USE OF THE BUDGET FUNDS
One of the main objectives of the Ministry of Finance of Ukraine is to provide financing for the
State to perform its functions (provision of public services) based upon efficient allocation and use
of the state financial resources. A key factor for the successful implementation of this objective is the
efficient functioning of the public finance management system.
Objective 1.1. Implementation of medium-term budget planning
The need to strengthen the link between the strategic priorities of the state policy, state budget
expenditures and performance results of key spending units requires a change in the approaches of
the budget funds managing.
Implementation of medium-term budget planning enables ensuring a consistent budget policy
and budget discipline, harmonizing the approaches of the legislative and executive branches in fiscal
policymaking for the medium term, and also increasing responsibility of the participants in budget
process.
Results and achieved goals by 2017 (inclusive)
For implementation of medium-term budget planning for 2015-2017, the Ministry of Finance of
Ukraine ensured the arrangement of the following requirements:
 stability of the annual state budget was increased. According to the amendments made in
the Budget Code of Ukraine, the law on the State Budget of Ukraine may be amended only in clear
defined cases;
 approbation of the medium-term budget planning model was provided. The Government
approved a project of Major Directions of Budget Policy for the mid-term period, which for the first
time identified the expenditure ceilings and budget financing for the key spending units. The Law of
Ukraine “On the State Budget of Ukraine 2018” was developed in accordance with the project of Major
Directions of Budget Policy for 2018-2020 and state strategic planning, including the Medium-Term Plan
of Government Priorities 2020;
 a legal basis for medium-term budget planning was created. The draft Law of Ukraine “On
Amendments to the Budget Code of Ukraine” was submitted by the Ministry of Finance of Ukraine
for consideration to the Government in December 2017, approved at the meeting of the Cabinet of
Ministers of Ukraine on January 31, 2018 and submitted for consideration to the Verkhovna Rada of
Ukraine.
At the same time, the draft amendments to the Rules of Procedure of the Verkhovna Rada
of Ukraine and to the Law of Ukraine “On the Cabinet of Ministers of Ukraine” were prepared and
approved in order to be aligned with the provisions of the updated Budget Code of Ukraine.

UKRAINE 2018–2021
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Planned objectives during 2018–2021
The primary objective in 2018 is to support the draft Law of Ukraine “On Amendments to the
Budget Code of Ukraine” in the Verkhovna Rada of Ukraine (regarding the legal basis for implementation
of medium-term budget planning) and the draft Law of Ukraine “On Amendments to Certain Legislative
Acts on the Implementation of Medium-Term Budget Planning. The subsequent implementation of
these laws is expected.
The Draft Law of Ukraine “On Amendments to the Budget Code of Ukraine” provides for
introduction of a budget declaration as a document of state strategic planning, which defines the
principles of budgetary policy in the medium term, strengthening of accountability and increased
responsibility of key spending units for the performance results in the relevant areas.
Furthermore, the Ministry of Finance of Ukraine is planning to perform key objectives during 2018:
Objective 1.2. Development of program-oriented method in the budget process
Improvement of the program-oriented method is an integral part of the budget reform aimed
to increase the responsibility for performance results of key spending units, to provide public with the
information on the quality of public service, and to increase the effectiveness of using the budget funds
by key spending units.

In 2017 the Ministry of Finance of Ukraine conducted the preparatory work on horizontal and
sectoral cost estimates according to the framework of the introduction of a comprehensive efficiency
assessment and spending expediency in order to ensure economies and deallocation of resources for
new priorities.
For the purpose of sectoral assessment, a resolution of the Cabinet of Ministers of Ukraine “On
the Review of Budget Expenditures in Certain Areas” was drafted and submitted to the Cabinet of
Ministers of Ukraine, and then adopted on February 21, 2018 under No. 101.
Key objectives in 2018-2021 Expected outcomes
Analysis of the possibilities of a budget margin
implementation and application to create a planning
reserve
Terms of References preparation and development of
modern software, including for providing the medium-
term budget planning
Training of the key spending units on the application of
improved budget planning tools
Quality monitoring of impact assessment of the adoption
of draft laws and regulations on the budget
Introduction of the medium-term budget planning and
development of the program-target method
Executive summary on possible models of using the
budget margin to reduce the negative impact of the
failure of macroeconomic and budget forecasts in the
medium-term budget planning
Increasing the level of automation and efficiency in
budget planning due to introduction of a modern
information and analytical system
Gaining the practical skills in the area of budget
indicators planning by key specialists
Development and approval of a new methodology for
assessing the impact of draft laws and regulations on the
budget
Institutional capacity for medium-term budget planning
strengthening, analysis of fiscal and tax policies, and
evaluation of the budget programs effectiveness

UKRAINE 2018–2021
19
In 2018 and in the medium term, the Ministry of Finance of Ukraine will ensure the implementation
of a sectoral and horizontal spending review as a modern tool for budget analysis and budget
management for assessing the effectiveness and expediency of expenditures and identifies new areas
for such reviews.
In addition to the review of expenditures, it is supposed to improve the requirements for budget
programs performance indicators and methodological framework for assessment of budget programs
effectiveness.
For further improvement of the program-oriented method, the Ministry of Finance of Ukraine is
planning to perform key objectives during 2018:
Objective 1.3. Effective fiscal risk management
The lack of an integrated fiscal risk management system negatively affects the reliability of fiscal
policies. This has negative consequences for the sustainability of public debt and the efficient allocation
of public resources in accordance with the priorities of public policy. Public finances in Ukraine are
susceptible to several significant financial risks, which include the risks associated with state-owned
enterprises and state property management, public debt and state guarantees, the financial sector
and changes in the macroeconomic situation.
In 2017 the Ministry of Finance of Ukraine for the first time prepared and included in the Budget
2018 Information on fiscal risks and their potential impact on the state budget in 2018. Furthermore, in
order to implement the fiscal risk management system in Ukraine, the Ministry of Finance in 2017 was
actively engaged in preparation of a legal framework for the fiscal risk management, in particular:
 methodology for fiscal risks assessment related to the activities of public sector economic entities
was developed and approved;
 regulations on the fiscal risk assessment were developed and included into the draft Law of
Ukraine “On Amendments to the Budget Code of Ukraine (regarding the legal basis for implementation
of medium-term budget planning)”;
 amendments to the Strategy for improving the operating efficiency of public sector business
entities were developed and approved.
Сonduction of the regular expenditure reviews in
ministries
Recommendations on improvement of the state
policy implementation and effectiveness of budget
expenditures in specified areas
Improvement of the system of performance indicators of
budget programs
Update of the methodology for monitoring and
assessment of effectiveness of budget programs,
development of the program-oriented method
Clear representation of the strategic goals achievements
and meeting the requirements of public services
recipients
Improvement of organizational and methodological
frameworks for assessment of budget programs
effectiveness. Evaluation of the budget programs
effectiveness in accordance with the updated
methodology

UKRAINE 2018–2021
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Objective 1.4. Verification of government social payments
The Government has set an objective to Ministry of Finance of Ukraine to ensure the
implementation of the state payments verification as an effective tool of a transparent social security
system development, public benefits targeting and budgetary expenditures optimization. The
verification process is aimed to ensure that the final beneficiaries are those citizens in need of the State
assistance.
In order to enhance effectiveness of the fiscal risk management during 2018-2021, the Ministry of
Finance of Ukraine is planning to implement advanced fiscal risk management systems and determine
their potential impact on the state budget in order to take timely measures for their mitigation in
accordance with best international practices.
In particular, during 2018 the following key objectives are planned:
Elaboration and submission of the expanded
methodology draft for fiscal risk assessment to the
Cabinet of Ministers of Ukraine
Implementation of fiscal risks management:
macroeconomic situation
state-owned enterprises and management
of state property
state guarantees
extra-budgetary funds
local borrowing
public-private partnership.
•
•
•
•
•
•
Strengthening the institutional and analytical capacity
for risk assessment, scenarios development, as well as
expected fiscal impact
Terms of References development on creation of the
information and analytical system for processing the
fiscal risk data
Delimination of the competence of the Ministry of
Finance of Ukraine in fiscal risk management
Terms of References approval to automate the fiscal risk
management processes and increase their efficiency.
Improvement of information exchange and inter-agency
coordination of fiscal risk management measures
Conducting a comprehensive assessment of fiscal risks
and the impact on the state budget
An extended report on fiscal risks impact

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In the context of government payments verification, the Ministry of Finance of Ukraine elicited
numerous facts of the information mismatches whereby the government payments have been entitled
and delivered. In consequence of the work results, the recommendations to the authorities that make
government transfer payments on suspension or termination of such were provided.
Implementation and advancement of the payment verification in 2017 empowered to improve
the work of the bodies that make social payments, improve maintenance of information databases
and registers, and also contributed to correction of inaccuracies and mismatches made in the process
of their maintenance.
The Ministry of Finance of Ukraine takes measures to implement the Information and Analytical
Platform for electronic verification and monitoring for the purpose of providing an effective model
for government payments monitoring and improvement the efficiency and quality of verification. The
platform is expected to be introduced into operational testing during 2018.
In 2018 and in the subsequent years, the Ministry of Finance of Ukraine will continue its work
on legislative regulation of the main legal and organizational principles for verification of government
payments in Ukraine, increase the targeted orientation of government payments and prevention of
the budget losses by verifying the information provided by individuals for assignment, accrual and/or
payment of all types of government transfer payments.

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Objective 1.5. Development of state internal financial control
In accordance with the commitments undertaken within the framework of implementation of
the Association Agreement between Ukraine, on the one hand, and the European Union, European
Atomic Energy Community and their Member States, on the other hand, Ukraine is in the process of
implementing the state internal financial control.
The state internal financial control system is developed through the implementation of the
measures aimed at the internal audit support (improvement of the internal audit methodology and
appropriate training activities for internal auditors) and development of internal control (implementation
of pilot projects for internal control and training activities), as well as improvement of the institutional
capacity of the Department for Harmonization of Public Internal Financial Control (CHU - Central
Harmonization Unit).
During 2017 the Ministry of Finance of Ukraine ensured the consistent implementation of measures
to develop the PIFC as an integral part of the public finance management reform, in particular:
 from January 1, 2017, in accordance with the best international practices, the authority to
perform the function of harmonization of PIFC has been transferred from the State Audit Service to the
Ministry of Finance of Ukraine through the establishment of the Department of PIFC Harmonization;
 with the assistance of the international partners, the Bilateral Cooperation Program and the
Roadmap have been developed to support the PIFC further development. An assessment (review) of
the overall situation of development and functional capabilities of the internal audit units in Ukraine was
also provided, and these results will set the priorities for further development of this function;
 legal regulation in the area of PIFC was improved, the Procedure for assessment of the internal
audit system was adopted by the Ministry of Finance of Ukraine;
 7 training events were held in cooperation with the Dutch experts, which resulted the skill
improvement of 180 internal auditors.

UKRAINE 2018–2021
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During 2018-2021, the Ministry of Finance of Ukraine will ensure further development of
state internal financial control by harmonization with the internationally recognized standards and
methodologies and the best European practices.
Conduction of an assessment (review) of the internal
control functioning coordinated with the Dutch experts
Proposals on the measures aimed at further
development of internal control and implementation
of the best European practices in this area
Implementation of the pilot projects on internal control
and internal audit
Recommendations based upon the results of pilot
projects aimed at improvement of the overall
organization of internal control, including formation
of the structure of internal control, risk management,
supervision of internal control, as well as improvement of
internal audit activities
Improvement of the methodological support for internal
control and internal audit
Harmonization of methodological support regarding
public internal financial control with internationally
accepted standards and methodologies and the best
European practices
Update and implementation of the skill improvement
program for internal auditors
Gaining the practical skills and knowledge regarding
PIFC by the relevant specialists
Conduction of training activities on internal control and
internal audit (trainings, workshops, roundtables)
External evaluations of the quality of internal audits in
ministries, other central executive authorities, regional
administrations and Kyiv city state administration
Recommendations for internal audit improving

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Objective 1.6. Accounting and audit reforming
In accordance with the requirements of EU legislation relating
to accounting and auditing, International Financial Reporting
Standards (IFRS), International Public Sector Accounting Standards
(IPSAS) and strategic documents for public finance management
and accounting, reforming of accounting and audit, as well as
accounting and financial reporting system in the public sector, will
be conducted.
The Association Agreement between Ukraine and the
European Union determinates that the Parties have agreed to
cooperate, in particular with regard to implementation of the
relevant international standards at the national level and gradual
approximation to the EU law in audit and accounting.
In order to bring the national accounting legislation into
compliance with the requirements of the EU legislation in this regard,
the Ministry of Finance of Ukraine developed a Draft Law of Ukraine
“On Amendments to the Law of Ukraine “On Accounting and
Financial Reporting in Ukraine”.
The Verkhovna Rada of Ukraine adopted the Law of Ukraine
No. 2164-VIII, October 05, 2017 “On Amendments to the Law of
Ukraine “On Accounting and Financial Reporting in Ukraine”, which
came into effect on January 01, 2018.
The adopted Law will improve the legislative framework for
accounting and financial reporting in accordance with the provisions
of European legislation, and also increase the level of transparency
and comparability of financial reporting indicators of domestic
companies, therefore contributing to improvement of the investment
climate in Ukraine.
The Ministry of Finance of Ukraine developed a Draft Law
of Ukraine “On Financial Audit and Audit Activities” for the purpose
of harmonizing the national audit legislation with regulations of the
European legislation in the relevant field.
The Verkhovna Rada of Ukraine adopted the Law of Ukraine
No. 2258-VIII dated December 21, 2017 “On Financial Audit and Audit
Activities”, which came into effect on February 07, 2018 and will be
introduced on October 01, 2018.
Implementation of the audit reform in Ukraine will ensure the
increased level of investor confidence in the financial statements of
domestic enterprises, increased level of confidence in the activities of
national auditors, make it impossible to provide unsatisfactory audit
services, and also enhance transparency and reliability of financial
statements of securities issuers, banks, insurance companies, other
public companies, including state-owned enterprises and open
access to European markets for Ukrainian auditors.
The adopted laws of Ukraine comply with Ukraine’s
commitments regarding the European integration, in particular
in respect of execution of the Association Agreement in terms of
implementation of EU regulations.
The Ministry of Finance of Ukraine took measures to improve the
accounting system in the public sector as a result of implementation
of the Strategy for Modernization of the Public Sector Accounting

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System for 2007-2015 and the Strategy for Development of the Public Finance Management System.
In particular, there were approved:
 20 national accounting provisions (standards) in the public sector (NAP(S)PS) developed on the
basis of international accounting standards in the public sector, and methodological recommendations
for their application;
 theaccountingplaninthepublicsector,developedinaccordancewiththebudgetclassification.
Contains sub-accounts to represent operations on budgets implementation, key spending units and
state specialized funds, and the application procedures;
 forms of financial reporting and filling out procedures;
 a standard provision on the accounting service of a budgetary institution;
 recommendations on comparison of classifications of incomes and expenditures in national
standards with the budget classification of incomes and expenditures, etc.
The main objective of the Ministry of Finance of Ukraine for 2018-2021 in this direction is:
 preparation of regulatory acts in accordance with the Plan for preparation of draft acts to ensure
the implementation of the Law of Ukraine “On Amendments to the Law of Ukraine “On Accounting and
Financial Reporting in Ukraine” regarding the improvement of certain provisions” No. 2164-VIII dated
October 05, 2017 approved at the meeting of the Cabinet of Ministers of Ukraine dated November 22,
2017 (Protocol No. 66);
 preparation of regulatory acts in accordance with the Plan for preparation of draft acts to
ensure the implementation of the Law of Ukraine No. 2258-VIII dated December 21, 2017 “On Audit
of Financial Reporting and Auditing Activities” approved at the meeting of the Cabinet of Ministers of
Ukraine dated February 28, 2018 (Protocol No. 8);
 approval of the updated Strategy for Modernization of the Public Sector Accounting System
and implementation of the appropriate action plan.

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Objective 1.7. Improvement of inter-budget relations
Improvement of inter-budget relations is one of the key objectives in the context of increasing
the efficiency of resource allocation at the level of the state budget policy formation.
The Ministry of Finance of Ukraine actively participates in the process of decentralization of
power, creation of appropriate material and financial conditions to ensure that local self-government
bodies perform their own and delegated powers, for provision of local self-government bodies with
fiscal instruments to increase their own resources and reduce their financial dependence on the central
government.
Within the framework of the Concept for the Reform of Local Self-Government implementation,
active work is being provided on the formation of capable territorial communities. The budgets of the
united territorial communities acquire the same budgetary powers as budgets of regional significance
and transfer to direct relations with the state budget and receive inter-budget transfers directly.
More than 3,000 small-scale territorial communities have been enlarged due to the voluntary
association process in 2015-2017.
Since 2015 the reform of the budget system has begun and a new model of inter-budget
relations has been introduced. Due to implementation of the reform of inter-budget relations, it became
possible to achieve the following results:
 new progressive relations in budgetary resources management have been established;
Development and approval of the regulatory acts in the
field of accounting
Harmonization of regulatory acts in the field of
accounting into compliance with the Law of Ukraine
“On Amendments to the Law of Ukraine “On Accounting
and Financial Reporting in Ukraine”
Development and approval of the regulatory acts in the
field of audit
Harmonization of regulatory acts in the field of audit
into compliance with the Law of Ukraine “On Audit of
Financial Reporting and Auditing Activities”
Development and approval of the regulatory acts on
the national accounting provisions (standards) in the
public sector
Assurance of the effective legal and regulatory
framework for accounting in the public sector
Development of a training program for specialists of
the public sector entities on the application of national
accounting provisions (standards) in public sector
Improvement of the professional competence of
specialists in the field of accounting in the public sector
Development of the integrated information and
analytical system for information exchange and
consolidation of financial reporting using databases and
information systems
Development of the integrated information and
analytical system
Harmonization of the Ukrainian legislation in the field of
accounting and auditing within the EU standards
Implementation of the statements of the Directive
2006/43 /EC and Directive 2013/34 / EC

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 the level of financial support for local budgets has been increased; the revenue capacity of
local budgets has more than doubled;
 created conditions for motivating local governments to increase the revenue base for local
budgets;
 local state bodies were given the right to establish the local tax rates at their own discretion
within the limits set by the legislation and provide benefits for payment thereof;
 the system of inter-budget equalization has been changed: the mechanism of balance of
expenditure powers was replaced by a more progressive model, that allows to leave most of the funds
on the local level (the horizontal equalization of the local budgets’ capacity);
 the system of vertical balancing of expenditures was replaced by the horizontal equalization of
local budgets’ fiscal capacity;
 provision of high-quality public services to consumers was ensured due to expanding the
expenditure powers of local self-government bodies;
 investment resources of local budgets were increased;
 the range of local budgets that have relationship with the state budget was expanded.
Therefore, a matter of full budgetary autonomy and financial independence of local budgets
has been regulated at the legislative level, thereby complying with the major objectives of the Concept
of Reforming the Local Self-Government and Territorial Organization of Power in Ukraine.

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In the State Budget for 2018, 1288 budgets established relations with the state budget, with 665
thereof being the budgets of the united territorial communities. The number of budgets of the united
territorial communities has increased by 299 as compared to the number of those in 2017 and by 506 in
2016. Their number will increase every year, thereby ensuring implementation of one of the directions of
the inter-budget relations reforming – transition to a two-level budgetary system relations (state budget
– local budget).
Within the period of 2018 to 2021, the Ministry of Finance of Ukraine is focused to continue the
development of inter-budget relations by introducing the medium-term budget planning and program-
oriented method improvement at the local level:
Development of general recommendations for local
state bodies on determination of mechanisms for
citizens participation in the budget process
Strengthening the influence of the public on the use of
local finances
Development of general recommendations for local
state bodies on the preparation and approval of budget
regulations
Enhancement of the financial transparency and
accountability of local self-government bodies
Improvement of the mechanism of equalization of
local budgets fiscal capacity. The extension of
the tax base for to local budgets incomes
Reduction of budgetary imbalances between the local
budgets. Formation of the balanced local budgets.
Establishing the incentives to increase the tax capacity
of territories and efficient use of funds
Development of methodological recommendations
on the preparation of the medium term local budgets,
consistent with the methodology of the state budget
medium-term planning
Strengthening the capacity of territorial communities to
develop the medium term local budgets

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Objective 1.8. Enhancement of the budget transparency
Implementation of the principles of efficiency and effectiveness, publicity and transparency
implies an effective system of key indicators of efficiency and tools for the public awareness-raising
in respect of drafting, consideration, approval, implementation of state and local budgets, as well
as implementation monitoring. The objective is to implement the Information and Analytical System
“Transparent Budget” and ensure its operational testing, including the module “Budget for Citizens”, for
the budget process transparency and creation of a mechanism for the public participation.
In accordance with the Law of Ukraine “On the Openness of the Use of Public Funds” in 2015
the development of a single web-portal of budgetary funds use was started in order disclosure of the
information about the public funds.
In 2017 a single web-portal on the use of public funds was introduced (https://spending.gov.ua).
Ukraine’s rating in the Open Budget Index increased from 46 points in 2015 to 54 in 2017.
Implementation of the pilot operation of the “Budget for
Citizens” module within the framework of the information
and analytical system “Transparent Budget”
Increasing the transparency of the budget process
“Budget for Citizens” publication and presentation Publication of the Budget key indicators visualization on
the official web-site

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Objective 1.9. Enhancement of the institutional capacity
of the Ministry of Finance of Ukraine
Increasing the institutional capacity of the Ministry of
Finance of Ukraine in formation and coordination of the state
policy and strategic planning, participation in public administration
system reforming, increasing professionalism, accountability and
effectiveness of employees are the priority areas of reforming. The
increase of institutional capacity also depends on the level of internal
processes automation and introduction of the modern technologies
in the area of information and telecommunication infrastructure.
PUBLIC ADMINISTRATION REFORM
The Ministry of Finance of Ukraine is involved in the public
administration reforming process. The Ministry of Finance has been
selected as one of 10 pilot ministries, in which new departments were
established (the Directorate of the Strategic Planning and European
Integration), and new reform support positions (the RSPs) were
introduced.
The Ministry of Finance of Ukraine achieved the following
results within the framework of the implementation of the Concept
for the introduction of RSPs:
 the functional analysis in identification of the key policy
areas of the Ministry of Finance was performed, which resulted the
categorization of functions into “political” and “non-political”;
 the updated organizational structure was approved and
6 Directorates were established, with 98 positions of reform experts
provided therein;
 missions, goals, core responsibilities and areas of state policy
formation for each Directorate were determined;
 competitive procedures were implemented, 514 applications
to the Directorate of Strategic Planning and European Integration
were received for vacant positions of reform experts.
ESTABLISHMENT OF THE EFFECTIVE HUMAN RESOURCES
MANAGEMENT SYSTEM
During 2017 the Ministry of Finance of Ukraine took a measures
aimed at establishing an effective system of human resources
management in accordance with the best international practices
along with participation in public administration system reform:
 measures to determine the objectives, key performance
indicators, efficiency and quality of civil servants activities in the
administration of the Ministry of Finance of Ukraine were provided for
evaluation of the official results of civil servants activity; in particular,
the connection between these objectives for 2018 and the strategic
objectives of the Ministry of Finance was established;

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In the medium term perspective the Ministry of Finance of Ukraine plans to increase its institutional
capacity, introducing the best international HR management practices for the purpose of professional
and personal development of employees, and also to provide automatization of the main processes
and integration of the existing software solutions.
Key objectives are planned to implement during 2018:
 the staff survey was conducted using the best international practices; the results were applying
in a relevant Action Plan preparation to enhance motivation and professional competence and the
implementation of certain activities for this period was provided;
 cooperation with educational institutions was established and new educational services were
involved, including short-term trainings, workshops, etc.;
 a Schedule of trainings for employees of the Ministry of Finance of Ukraine was developed and
316 employees of the MoF improved their skills.
IT CAPACITY INCREASING
As of the beginning of 2017 the information and telecommunication infrastructure of the Ministry
of Finance of Ukraine were in satisfactory condition and required prompt and effective measures in IT
equipment upgrading. During 2017 the following results were achieved:
 the cryptographic information security and data storage system have been updated;
 equipment for the main and reserve data center was acquired;
 hardware equipment and licensed software for all employees were provided.

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Conduction of competitive procedures for the positions
of policy directorates
The competitions for the reform experts positions were
organized
Development of the Regulation of the project
management implementation, standards of project
documentation and methodological recommendations
Increasing the effective performance of strategic
objectives and implementation of modern approaches
of project activities in the MoF
Functional audit of the Ministry of Finance Exclusion of duplicate and unusual functions
Implementation of the monitoring system for strategic
goals and operational objectives
Increasing the level of control and reporting in
implementation of strategic goals and operational
objectives
Public Administration Reform
Establishment of an effective human resources management system
Measures for development and preparation of the HR
strategy for the Ministry of Finance of Ukraine
Identifying the main directions, goals and principles of
HR management and suggestions for its development at
the stage of HR strategy implementation
Approval of the Procedure for determining the needs
in professional training for employees of the Ministry of
Finance of Ukraine
Organization of trainings for employees and
determination of training needs in accordance with the
strategic objectives of the Ministry of Finance of Ukraine
Increasing the IT capacity
ConductionoftheITAuditintheMinistryofFinanceofUkraine Assessment of the current status of IT infrastructure,
securitylevel, developmentandintegrationopportunities
Development and approval of the Strategic Plan for IT
infrastructure Development (IT Strategy)
Identification of directions for the IT infrastructure
further development, improving their efficiency and
automation level
Introduction of the electronic document management
system
Full transition to paperless document circulation to
improve the effectiveness and efficiency of workflows
Introduction of a methodological basis (security policies),
as well as software and technical solutions to secure the
information
Increasing the security level of the information
resources
Establishment of a stable and reliable IT architecture

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Objective 1.10. SFS’ databases monitoring and control
Development of a complex of software and hardware measures for analysis of information in
the databases and information resources of the SFS used for administration of taxes, fees and other
compulsory payments for the purpose to create the monitoring systems.
To comply with the requirement of the paragraph 1, clause 5, section II “Final and Transitional
Provisions” of the Law of Ukraine No. 1797-VIII of December 21, 2016 “On Amendments to the Tax Code
of Ukraine for Improving the Investment Climate in Ukraine”, based on the Resolution of the Cabinet of
Ministers of Ukraine No. 484 of June 21, 2017, the Regulations on the interdepartmental working group
on the independent audit of databases and information resources used by the SFS (hereinafter referred
to as the interdepartmental working group) were approved.
The interdepartmental working group was conducted from June 29, 2017 to September 01, 2017
and representatives of the following organizations were involved: Ministry of Finance of Ukraine, Security
Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine,
State Agency for E-Governance of Ukraine, and the State Enterprise “Ukrainian Special Systems”.
The report of the interdepartmental working group on the results of auditing the databases and
information resources used by the SFS was submitted to the Cabinet of Ministers of Ukraine by the letter
No. 26000-04-3/26, confidential dated January 31, 2018.
For implementation of the requirements of the above-mentioned resolution of the Cabinet of
Ministers of Ukraine regarding the control system establishment, including monitoring the administration
by SFS of databases and information resources, the software of the Oracle business intelligence system
and the necessary equipment were purchased, in particular: SAN switches, IBM Power System S822
servers, cryptographic information security equipment for fiberoptic communication system between
the Ministry of Finance of Ukraine, SFS and the State Treasury Service of Ukraine.

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The reporting indicators and data structures of the SFS used in tax administration with a view of
establishing a system for monitoring the SFS reporting indicators are planned to analyze and summarize
in 2018-2021.
It is planned to provide the software and hardware measures to identify the potential threats
of interference in the operation of databases and the SFS information resources and the effective
methods for their prevention in order to develop a system for detecting and preventing the threats of
external and internal interference.
Objective 1.11. Implementation of a new model of healthcare system financing
For the purpose of effective use of budget funds for public healthcare, improving its quality
and accessibility, it is necessary to change the model of healthcare system financing by transition from
maintenance of a network of public and communal healthcare institutions (maintenance of buildings,
patient capacity and medical staff regardless of the quantity and quality of medical services provided)
to payment for the performance results and for the medical services actually provided to patients.
According to the Order of the Cabinet of Ministers of Ukraine “On Approval of the Concept of
Healthcare Financing Reform”, the regulatory acts have been adopted that determine:
 introduction of a program of public healthcare state guarantees (health insurance programs),
that provides a scope of medical services and medications, the full payment of which is guaranteed to
patients by the State due to the State Budget of Ukraine according to the tariff;
 the phased change of the healthcare expenditures differentiation between the state budget
and local budgets in connection with introduction of the health insurance programs;
 implementation from April 1, 2017 of medical reimbursement during ambulatory treatment of
people with cardiovascular diseases, diabetes mellitus type II, bronchial asthma.
The Law of Ukraine “On the State Budget of Ukraine 2018” provides expenditures for
implementation of the state guarantees program for primary health care from July 1, 2018.
In 2017, according to the proposal of the Ministry of Finance of Ukraine and the National
Academy of Medical Sciences, a pilot project was launched. The project provides the transition from
the maintenance of four clinics of research institutes of the National Academy of Medical Sciences to
the payment for the services of tertiary (highly specialized) medical centers provided.
Development of reporting forms for the information
resource of the Ministry of Finance of Ukraine
Implementation of one of the stages of the monitoring
system for the SFS reporting indicators
The order of development, analysis and monitoring of
the SFS’s reporting indicators
Development of a monitoring system for SFS reporting
Determination of types of the external potential threats
intervention in the operation of databases and the SFS’s
information resources and effective methods of their
prevention
Development of the information system for identifying
and preventing the interference threats with the
operation of databases and information resources of
the SFS

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During its implementation in 2017 the citizens were provided with more than 8 thousand services
of highly specialized expensive medical care. However, the short term of the pilot project did not allow
to launch a new model in full and make all services completely free for patients (70% of the services
cost were at the expense of the state budget, 30% of the cost of services were additional payments
made by the patients for medicines and medical products at their own expense).
Implementation of the medical care guarantees
program for primary health care from July 1, 2018,
establishing a capitation rate and adjustment factors for
payment of primary public healthcare
Gradual introduction during 2019-2020 of the state
guarantees of public healthcare under the program
of medical care guarantees for other types of medical
care, in particular by implementation of pilot projects for
certain types of medical services, individual healthcare
institutions or regions
Further implementation of the program on compensation
of the cost of medicines (reimbursement) during
outpatient treatment of people with increase in the
number of medical conditions covered by the program
Further implementation of the pilot project of the
financial support mechanism for medical care provision
in four clinics at the research institutes of the National
Academy of Medical Sciences
Increasing the efficiency of budget funds to provide
public healthcare and improve the quality and
availability of the healthcare
Objective 1.12. Enhancement of the expenditure planning transparency for higher education
In accordance with the Article 87 of the Budget Code of Ukraine, expenditures for higher
education are paid from the state budget (payment for education of specialists, scientific and
academic staff on the public contract conditions in the state-owned higher educational institutions of
III-IV accreditation levels, e.g. universities, academies, institutes).
However, as practice shows, the public contract indicators are actually formed based upon
the principle of maintenance of a higher educational institution, rather than with account of the
government needs in preparation of specialists with higher education.
Annually there is an underperformance of the approved public contract volumes (5.5 thousand
people in 2013, 25.3 thousand people in 2014, 8.4 thousand people in 2015, and 14.8 thousand people
in 2016).
It should be noticed that, despite the failure to fulfill the planned volumes of admissions to higher
education institutions, expenditures for higher education were not reduced, thus resulting in 1.2 billion
UAH of budget funds ineffectively used in the last four years.
Changes to the Budget Code of Ukraine, that establish the volume of state budget expenditures
for higher education is distributed among higher educational institutions on the basis of the formula
were provided by the initiative of the Ministry of Finance of Ukraine.

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The formula is developed by the central executive body, which ensures the development and
implementation of the state policy in the field of education, and is approved by the Cabinet of Ministers
of Ukraine with the following parameters:
 the number of applicants for higher education according to the academic levels and specialties
and the ratio of the cost for the educational services;
 the level of external independent evaluation of matriculated students;
 quality indicators of educational and scientific activities of a higher educational institution.
Evaluation and analyzing the effectiveness of spending
costs on training for higher education institutions
Increase the efficiency of use of budget funds for higher
educationParticipation in preparation of proposals and
calculations on the introduction of allocation of state
budget expenditures for higher education on the basis
of a formula

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Objective 1.13. Monetization of subsidies at the household level
Introduction of monetization of subsidies in Ukraine is an important and responsible step in the
social protection system reforming. Transition from the outdated model of subsidies to their monetization
is the significant approach for energy efficiency and economical use of energy resources.
Monetization of subsidies at the household level is the final stage of the subsidies monetization
and is intended to ensure the state policy reforming in the system of subsidies, increase their targeting and
strengthen control over expenditures in this regard. Accessibility and transparency in implementation
and administration of this program will eliminate the possibility of abuse and corruption.
During the reporting period, preparation and legal regulation were implemented in terms of
introduction of the first stage of monetization of payments for subsidies at the level of service providers.
Therefore, from the year 2018 the budget funds for subsidies are transferred directly for the actually
consumed resources and services provided, which makes it impossible to obtain more subsidies than
households have consumed.
Introduction of the direct settlements with service providers with clear deadlines for transfer of
funds provided a transparent and targeted direction of budget funds and increased control over their
use.
Monetization of subsidies at the household level is the next stage, that provides the subsidies
to the citizens as a payment of housing and public utility services in cash form at the final consumer
level. For this purpose, it is necessary to ensure the single register establishment with a regularly updated
database of the grantee households and their verification, that provides for a complete inspection of
income of the subsidies recipients.
Development and approval of a mechanism for subsidies
providing to the citizens for payment of housing and
public utility services in cash form at the final consumer
level from January 1, 2019
Preparation of the legal basis for monetization of subsidies
at the household level

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4.2. STRATEGIC GOAL NO. 2.
SIMPLE, EFFECTIVE, FAIR TAX AND CUSTOMS SYSTEMS THAT CONTRIBUTE TO
ECONOMIC DEVELOPMENT AND COMPLY WITH EU STANDARDS
The next important objective of the Ministry of Finance of Ukraine is to ensure the development
and implementation of tax and customs policies, to ensure the efficient accumulation of resources
necessary for the State to perform its functions, providing the fairness and equality of the tax system,
its adaptation to the norms and regulations of the European Union, absence of negative influence for
doing business and promoting economic development.
Objective 2.1. Improvement of the tax system efficiency, stability and predictability
A key factor for success in improving the quality and efficiency of tax administration is the reform
of the State Fiscal Service of Ukraine (SFS) by transforming it into a service body that provides assistance
to business entities and citizens in taxation and is able to counteract the tax evasion effectively.
The quality and efficiency improvement of tax administration was one of the most important
objectives of the Ministry of Finance of Ukraine in the last few years. Therefore, high consideration is
given not only to the legislative regulation, but also to the modern IT solutions implementation that will
allow to minimize the risks associated with manual interference of the information systems work.
During 2017 the following results and goals were achieved:
 a Register of automatic VAT refund was launched, that allowed to minimize the risks of corruption
and “manual” interference with the refunding process;
 the VAT risk monitoring system was launched, that gave the possibility to provide the automatic
process of invoices monitoring and minimize the corruption threats;

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 the control procedure was approved, including the SFS databases monitoring on the
administration of taxes by the Ministry of Finance of Ukraine;
 the process of tax consultations providing was launched;
 a risk-oriented tax control system was reconsidered and updated;
 a separate operational unit, that is responsible for implementation of the tax-related reforms,
was established within the structure of the Ministry of Finance of Ukraine.
The main results and key goals achieved by the Ministry of Finance of Ukraine in the field of the
SFS institutional capacity reforming and improving in 2017 are:
 the process of the tax police liquidation was initiated and a draft law “On the Financial
Investigation Service” was developed;
 new approaches to competitive selection at the SFS were introduced with the involvement of
representatives of the Ministry of Finance of Ukraine, Business Ombudsman and experts, as well as with
the use of audio and video surveillance;
 KPI’s for the SFS were introduced, that were developed with the public experts of the Reanimation
Package of Reforms in partnership with the Research Institute of Fiscal Policy and the Institute for Tax
Reforms;
 4 directions in the SFS reforming were defined:
• servicing of taxpayers;
• audit;
• tax debt repayment;
• staff relations
 an algorithm for the in-office audits automation was developed;
 the E-Cabinet functionality was updated.
In connection with the improvement of cooperation on international taxation and the
implementation of norms assigned in the Association Agreement with the European Union, the Ministry
of Finance of Ukraine achieved the following results during the year 2017:
 a draft law on the approaching of excise tax rates for tobacco products in accordance to the
minimum level of the EU was adopted by the Parliament;
 in order to balance the budget revenues in 2017, excise tax rates on alcoholic liquors were
increased by 20% and the classification of alcoholic liquors was approximated to the requirements of
the European Union for excise tax purposes;
 annual increase in excise tax rates for tobacco products was provided: in 2018 - by 29.7%, and
in subsequent years - by 20% to 90 EUR per 1,000 units;
 statutory regulation was provided concerning the equipment of excise warehouses on the
territory of which fuel is produced, processed (recycled), mixed, loaded/unloaded and stored, with
flow meters and level indicators.

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In the medium term further steps to improve the quality and efficiency of tax administration are
inseparably linked with the continued reform of the SFS in terms of standardizing the implementation of
key functions and procedures, as well as further improvement of the interaction in respect of international
taxation and compliance by Ukraine with the norms assigned in the Association Agreement with the
European Union.
In particular, Ministry of Finance of Ukraine is planning to implement key objectives during 2018:
Continuation of the comprehensive SFS reform improvement of corporate culture in the SFS and
its transformation into a service department that
encourages voluntary payment of taxes;
implementation of IT solutions in the work of the SFS;
introduction of risk management in processes of tax
audits, work with debtors;
elaboration of an Action Plan for SFS reforming after
approval of the Concept for reforming the system
of the state bodies that implementing the state tax
and customs policy
Establishment of the Agency responsible for the
investigation of financial crimes
Assurance of effective fight against tax and customs
offenses
Conduction of an assessment of the main components
of tax administration using the Tax Administration
Diagnostic Methodology (TADAT)
Improvement of the tax administration quality
Introduction of the unified form for tax reporting on
personal income tax and unified social tax
Simplification of the taxation process
•
•
•
•
Harmonization of legislation with the EU norms Implementation of the Association Agreement between
Ukraine and the EU on Directives: Directive 2007/74/EC,
Directive 92/83/EEC, Directive 2003/96 /EC, Thirteenth
Directive 86/560/EEC, Directive 2011/64/EC , Directive
2006/112/EC

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Objective 2.2. Tax base extension
One of the key areas of the tax policy development and implementation by the Ministry of
Finance of Ukraine is the work on the tax base extension, including the policies and practices of tax
base erosion and counteracting the profit shifting, transfer pricing control and reviewing the conditions
of avoidance of the double taxation.
Within the framework of the Strategy for the Reform of the Public Finance Management System
for 2017-2020, the Ministry of Finance of Ukraine achieved the following key results and goals:
 a draft law on the Exit capital tax was developed, and it will stimulate the increasing investments
into development of production and contribute to simplification of tax administration;
 the process of BEPS Action Plan implementation was initiated;
 a Roadmap for introduction of an automatic exchange of financial information for tax purposes
was developed;
 Protocols on amendments to the agreements on avoidance of double taxation with the United
Kingdom, the Kingdom of the Netherlands, Turkey, Malaysia and Cyprus were signed;
 the Convention on the Avoidance of Double Taxation with Malta and Luxembourg was drafted
and ratified by the Verkhovna Rada of Ukraine;
 an Agreement of the MLI implementation was prepared.

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During 2018-2021 it is planned to make further changes to broaden the tax base, primarily due
to full implementation of the Minimum Standard of BEPS, ensuring conditions for Ukraine’s accession
to the Multilateral Agreement of the competent authorities on the automatic exchange of financial
information, as well as analysis of the possibilities for extending the base of property taxation using the
best world practices.
In particular, it is planned by the Ministry of Finance of Ukraine to implement key objectives
during 2018:
Fully compliance with the Minimum Standard of BEPS Reduction of tax frauds and application of tax base
erosion practices
Development of the criteria for identifying the high-
income earners and providing the SFS with the
authority to access the information on their bank
accounts, provided that the data is properly protected
Establishment of an effective control over the
completeness and timeliness of tax payments by high-
income earners
Establishment of a control system for introduction of goods
intothemarket,includingtheexpandeduseofcashregisters
Strengthen control over the commodity circulation
Signing protocols on amendments to the Conventions on
the avoidance of double taxation and tax avoidance
with Switzerland, Belgium, France, Austria, Germany,
Spain
Extension of the list of partner countries concerning
avoidance of double taxation and prevention of tax
evasion
The Ministry of Finance of Ukraine is planning to implement certain provisions of the EU Council
Directives on a common system of value added tax and excise taxes for implementation the regulations
of the Association Agreement with the European Union.
Ensuring the possibilities for Ukraine’s accession to the
Multilateral Agreement of the competent authorities on
the automatic exchange of financial information
Signing of the Multilateral Agreement by the Competent
Authority of Ukraine. Implementation of the Single
Standard of Reporting, which provides the periodic
(once a year) exchange of tax information between the
countries that have joined the implementation

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Objective 2.3. Improvement of customs performance efficiency
Within the framework of the SFS reforming, the Ministry of Finance of Ukraine and the Government
are providing a customs reform that will enable to implement a conceptually new procedure for
interaction of customs offices with the entities engaged in foreign economic activities.
The reform is aimed to improve the quality, ensure transparency and increase the operational
efficiency of the customs offices by improving the legislation; strengthening institutional capacity
according to the best European practices and EU guidelines, accelerating export and import of goods
and facilitating trade procedures.
By the end of 2017 the Ministry of Finance of Ukraine has achieved the following key results and
objectives:
 draft laws regulating customs matters were submitted to the Verkhovna Rada of Ukraine, in
particular on the introduction of the institution of an authorized economic operator, the simplification
of radiological and ecological control, customs and brokerage activities:
 the Procedure of information exchange between the tax agencies, other state bodies and
enterprises was improved on the basis of a “single window” principle, using the electronic information
system;
 a legal and regulatory framework was created for introduction of a single account for all the
SFS customs offices, opened on behalf of the SFS, that will allow the companies to pay customs duties
at any customs office on the territory of Ukraine;
 a Strategy for development of the risk management system regarding the customs control
for the period up to 2022 and the Anti-smuggling Tobacco Strategy for the period up to 2021 were
approved.
• “On Amendments to the Customs Code of Ukraine (regarding certain issues of
implementation of Chapter 5 of Section IV of the Association Agreement between Ukraine,
on the one hand, and the European Union, European Atomic Energy Community and their
Member States, on the other hand”;
• “On Amendments to the Customs Code of Ukraine on the Reform of the System of
Ecological and Radiological Control at Checkpoints” and “On Amendments to Certain Laws of
Ukraine on the Reform of the System of Ecological and Radiological Control at Checkpoints”;
• “On Amendments to the Customs Code of Ukraine Regarding the Deregulation of
Certain Types of Economic Activity Controlled by the Tax Agencies”;

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44
Within the framework of implementation of the Association Agreement between Ukraine and
the EU regarding the customs, the Ministry of Finance has prepared a number of draft laws.
As for now, 6 draft laws are at the Verkhovna Rada of Ukraine.
Adoption of the draft laws by the Verkhovna Rada of Ukraine in 2018 will create the conditions
for fulfillment of the obligations under the Agreement in terms of:
 creation of preconditions for initiation of the procedure for Ukraine’s accession to the Convention
on the simplification of formalities in trade in goods and Convention on the common transit regime;
 introduction of an institute of authorized economic operator in Ukraine, similar to the operating
in the EU;
 bringingtheUkrainianlegislationintocompliancewiththeEUregulationsoncustomsenforcement
of intellectual property rights and exemption from customs duties.
Further customs performance improvement implies Ukraine’s accession to the European transit
system (NCTS), continued harmonization of the legislation of Ukraine and the European Union, as well
as implementation of measures in accordance with the Action Plan on Customs Reform.
In particular, during 2018 it is planned by the Ministry of Finance of Ukraine to implement key
objectives:
Preparation of the Draft law on harmonization of the
Ukrainian legislation to the EU customs legislation
Creation of favorable environment for economic activity
and fulfillment of obligations under the Association
Agreement with the EU
іFurther development of the electronic system of
information exchange based on the “single window”
principle
Reduction of the time expenditures during the export-
import operations
Preparation of the secondary legislation for full
implementation of the institution of an authorized
economic operator
Reduction the time and money expenditures on foreign
trade by accelerating the movement of the goods
between the counterparts
Preparation of the submission for consideration to the
Cabinet of Ministers of Ukraine a draft Action Plan on
Customs Reform in accordance with the EU guidelines,
(the Customs Blueprints)Development of the risk
Comprehensive customs reform
management system in the area of customs control and
customs’ IT infrastructure modernization
Automation of customs procedures and introduction
of an effective system of monitoring and control at the
customs offices

UKRAINE 2018–2021
45
4.3. STRATEGIC GOAL NO. 3.
FINANCIAL SYSTEM ENSURING SUPPORT FOR MACROECONOMIC STABILITY, EFFECTIVE
FINANCIAL MONITORING AND USE OF RESOURCES FOR ECONOMIC DEVELOPMENT
In order to ensure the financial policy formation and implementation, the Ministry of Finance
of Ukraine is responsible for providing the macroeconomic stability in terms of the financial system
consistence through the maintaining the level of government budget deficit and public debt at an
economically sound level, as well as by creation of conditions for the state bank proper management
that will provide the effective financial intermediation and directing the resources of the banking sector
for economic development purposes. Effective monitoring of financial transactions that will prevent
the financial system from the money laundering, terrorist financing and spread of weapons of mass
destruction, must also be provided.
Objective 3.1. Budget balance and debt security
Due to the national currency devaluation, Ukraine’s public debt for 2014-2016 has more than
tripled, that affected the ability of the State to settle its debt obligations and reduced to its credit-rating
downgrades and the necessity of restructuring the public debt and publicly guaranteed external debt.
A foreign currency component of the public debt, as well as peak payments for the public sector debt
reimbursement in 2019-2020 regarding the currency risk and the public debt refinancing risk are defined
as high.
The medium-term strategy for the public debt management for 2018-2020 determines public
debt management objectives:
 increasing the share of public debt in the national currency, including by attracting foreign
investors to invest in bonds in the national currency;
 prolonging the average maturity of government securities and ensuring the provision on evenly
scheduled basis repayment of the public debt, including through active management of public debt
management with a view to reducing peak pressures on the state budget and stimulating demand for
government securities;
 attraction of long-term privileged financing by expanding cooperation with the international
financial organizations, in particular the World Bank, the International Monetary Fund, the European
Bank for Reconstruction and Development, the European Investment Bank and the governments of
partner countries of Ukraine;
 development of strong relationships with investors, including through ensuring openness and
publicity.

One of the main objectives of the budget policy is a gradual reduction of the state budget
deficit and, accordingly, reduction of the public debt in terms of gross domestic product aimed at
stabilization of the public finances determined by the Coalition Agreement, the Medium-Term Plan
of Government Priorities 2020, Sustainable Development Strategy “Ukraine-2020”, Strategy for the
Reform of the Public Finance Management System for 2017-2020 and programs of cooperation with
international financial institutions.
Financial support of Ukraine from the international institutions as well as from the European
Union and the United States, will have a considerable impact on the economic situation and further
implementation of reforms.

UKRAINE 2018–2021
46
ON THE BUDGET BALANCE
The state budget deficit indicator approved in the laws on the State Budget of Ukraine (as
amended) amounted to 4.1% of GDP in 2015 (actual – 2.3%), 3.7% of GDP in 2016 (actual – 2.9%), 2.7%
of GDP (actual – 1.6%) in 2017.
On the one hand, the reduction of the relative indicator of the state budget deficit restricts the
possibilities for financing the priority areas of expenditures, including those aimed at realizing reforms.
On the other hand, it contributes to the public finances stabilization, in particular due to lower the rates
of public debt growth and, accordingly, expenditures for its servicing.
At the same time, further possibilities for reducing the level of the state budget deficit are
substantially limited by the need to provide defense and security expenditures, public debt servicing
and inter-budget transfers that have substantially increased in recent years.
Thus, for the period from 2013 to 2017, the actual state budget expenditures, as a percentage
of GDP, have increased under the functional classification of the expenditures: for defense – by 1.5%,
for servicing the public debt – by 1.6% and for inter-budget transfers – by 1.5%, for public security,
security sector and judicial power – by 0.4%.
ON THE DEBT SECURITY
In 2017 the Ministry of Finance of Ukraine performed the work on improving the legislation on
the public debt and publicly guaranteed debt management. In order to enable active public debt
management operations, to bring the state external borrowing procedures into compliance with the
best international practices, and for the purpose of resolving the debt policy issues (improvement of the
approval procedure for the medium-term public debt management strategy) and cooperation with
the international financial institutions, the amendments in the Tax and Budget Codes of Ukraine were
made.
The implementation of measures for the development of the domestic bond market are
continued to be provided. The Ministry of Finance of Ukraine together with the World Bank experts
analyzed the results of auctions on domestic government bonds placement in the last years and
changed approaches to auctions. The need to increase the volumes of issue of each instrument to the
liquid capital is supposed to be achieved by the additional placement of the existing instruments, without
issue of the new ones, with the same maturity. Weekly consultations with primary dealers concerning

UKRAINE 2018–2021
47
the demand for domestic government bonds were established, which resulted in the adjustment of
the schedule of domestic government bonds placement. These approaches ensure transparency and
predictability of the issuer’s actions in the domestic bond market, which contributes to increasing the
confidence of investors, including the foreign ones.
In consultation with the Cabinet of Ministers of Ukraine, the Ministry of Finance of Ukraine involved
a financial advisor on public debt management and state external borrowing.
The activities were performed to ensure the full access of Ukraine to the foreign capital markets.
In September 2017, for the first time after the foreign national debt restructuring in 2015, Ukraine
issued the domestic government bonds for a principal amount of $3.0 billion with a maturity of 15 years
at a rate of 7.375% per annum. General indicators of interest from investors in the new issue exceeded
$9 billion. This issue was recognized to be the best among the countries of Central and Eastern Europe,
Middle East and Africa, proving that investors are confident in Ukraine. It is an important step for effective
public debt management and stabilization of Ukraine’s financial system in the future.
The following measures to actively manage the public debt and ensure minimization of the risk
of the public debt refinancing were taken:
 the exchange and redemption of the domestic government bonds in 2015 of the first and
second series with a yield of 7.75% (for the principal amount of $ 1.2 bln and $ 0.4 bln, respectively) were
provided at the expense of the new issue. The risk of refinancing the government debt over the next
two years was reduced and the way for future transactions in order to further equalize the schedule
of Ukraine’s foreign national debt repayment was opened. This also contributed to stimulating the
investors’ demand for domestic government bonds in 2017;
 in October 2017 a public debt transaction (reprofiling) was carried out by the exchange of
domestic government bonds in the amount of UAH 219.6 bln held by the National Bank of Ukraine for
the new domestic government bonds with fixed interest rates and linking of the yield with the inflation
rate.
As a result of reprofiling, redemption of the domestic government bonds portfolio of the National
Bank of Ukraine will be evenly distributed about 12 billion hryvnias annually, that will allow to distribute
the load on the state budget for 30 years. In this case, simultaneous presence of domestic government
bonds with fixed and floating rates ensures the diversification of interest rate risk.
Cooperation with foreign investors and leading international rating agencies was intensified
by ensuring the transparency of the public debt management process and disclosure of relevant
information.
During 2017 sovereign credit ratings of Ukraine were raised or confirmed by the rating agencies
(Moody’s raised the level from “Caa3” to “Caa2” and the forecast from stable to positive, Standard

UKRAINE 2018–2021
48
& Poor’s confirmed the “B-” rating and the stable forecast; Fitch Ratings confirmed the “B-” rating and
stable forecast).
In 2017 the information and analytical system “Public Debt Management” was supported,
including improvements in the forecasting and reporting tools, improved public debt management
software for protection from attacks connected with vulnerabilities of systemic software against external
intrusions on servers, functional failure of the “Public Debt Management” system, databases distortion
and destruction.
During 2017 the Ministry of Finance of Ukraine prepared documents on the provision of state
guarantees and approval of the involvement of state-owned enterprises, 50% of which were owned
by the state, loans, loans, guarantees and guarantees. According to the results of 2017, the state
guarantees were provided for a credit of NNEGC “Energoatom” to finance the investment project
“Construction of a Central Spent Fuel Storage Facility for the VVER NPP of Ukraine” in the amount of
almost UAH 7.0 billion ($250.0 million), and loans raised in the framework of the Program for the Defense
Capacity and Security of Ukraine in the amount of UAH 1.1 billion.
The public debt and publicly guaranteed debt were maintained within its limits at the end of
2017. Against the background of improvement in the dynamics of economic and social development
of Ukraine and continued economic growth in 2017 initiated in the previous year, as well as reduction of
the state budget deficit from 2.9% of GDP in 2016 to 1.6% of GDP in 2017, the relationship of the public
debt of Ukraine to GDP also significantly improved – from 69.2% at the end of 2016 to 61.5% at the end
of 2017, and together with the publicly guaranteed debt – from 80.9% to 71.8%.

UKRAINE 2018–2021
49
ON THE BUDGET BALANCE
Under the conditions of low provisions for the expenditure needs for all major state functions,
further fiscal consolidation capacity is within the scope of sectoral reforms aimed at reducing the share
and role of the State or further revision of expenditure capabilities between the authorities and budgets
of different levels. The above-said fact makes it complicated to reduce the share of GDP reallocation
through the budget revenues, which should be done only in connection with the appropriate optimiza-
tion of the budget expenditure.
In the medium term the state budget deficit is expected to reach 2.4% of GDP in 2018, 2.2% of
GDP in 2019, 2.0% of GDP in 2020, and 2.0% of GDP in 2021.
ON THE DEBT SECURITY
The main objectives of the public and publicly guaranteed debt management in the medium
term are:
 further improvement of legislation concerning public and publicly guaranteed debt
management in accordance with the best international practices;
 implementation of measures for development of the domestic government bond market;
 active engagement of investors and international rating agencies;
 implementation of measures to minimize the risk of refinancing the public debt and avoid peak
loads on the state budget related to the public debt payments;
 enhanced cooperation with the international financial organizations.
Ukraine’s sovereign credit ratings increases to the “BBB” level by 2021 according to the Standard &
Poor’s rating agency, with the planned “B +” target at the end of 2018.

UKRAINE 2018–2021
50
Improvement of the legislation concerning the public
and publicly guaranteed debt management in
accordance with the best international practices
Establishment of the stringent restrictions on the state
guarantees provision. Improvement of the risk-based
monitoring mechanisms related to the government
guarantees, including the introduction of a risk-based
commissioning fee and improving the assessment of
the borrower’s credit quality in issuing such guarantees.
Approval of the Medium-Term Strategy for State Debt
Management in an updated format
Implementation of measures of the domestic market of
government securities development
Development of the primary dealers institution and
their rotation. Development of the base of investors in
the government bonds. Increase of the government
domestic borrowings share and government domestic
debt
Cooperation with investors and international rating
agencies
Assurance of full access to foreign capital markets.
Increase of Ukraine’s rating as for liabilities in foreign
currency according to the scale of the rating agency
Standard and Poor’s to the level of BBB by 2021
Measures to minimize the risk of the public debt
refinancing and to avoid the peak loads on the state
budget related to the public debt payments
Aligning of the public debt payment schedule
Expansion of the base of investors in securities Placement of a wide range of domestic government
bonds according to maturities in the volumes that will
ensure financing of the state budget deficit
Integration of liquidity and debt management functions
for better coordination of the strategies for issuance of
debt instruments and investment of idle funds
Determination of an effective mechanism for placing
temporarily debt instruments of the single treasury
account and currency accounts of the Government
and making such placements

UKRAINE 2018–2021
51
Objective 3.2. Effective and transparent cooperation with the international
financial institutions (IFIs)
One of the main objectives of the Ministry of Finance of Ukraine is the implementation of
measures to ensure fulfillment of the financial and other obligations of the state within the framework
of Ukraine’s membership in international financial institutions (IFIs). The Ministry of Finance coordinates
the work related to the initiation, preparation and implementation of projects of economic and
social development of Ukraine supported by the foreign countries, banks and international financial
organizations, monitoring the implementation of these projects, and providing the methodological
support for this work.
In 2017, there were 33 joint IFIs projects, in particular projects with the European Atomic Energy
Community with total amount 2.903 billion U.S. dollars and with the Credit Institution for Reconstruction
(KfW) in the amount of 4.712 billion euros.
To increase transparency and accountability, the publication of information on Ukraine’s
economic and social development projects supported by the IFIs has been launched on the official
website of the Ministry of Finance of Ukraine.
During 2017, the International Finance Corporation (IFC) was also able to finance projects in the
national currency, it was achieved an increase of 22% in the World Bank current project portfolio and
more than doubled in the European Investment Bank portfolio.
The priority objective of the Ministry of Finance of Ukraine during 2018-2021 is to intensify the
activities in the framework of joint projects with the IFIs, foreign states, banks, in particular by implementing
the measures that will increase the volume of the sample of loans and will strengthen the control over
their effective and targeted use.
As of September 30, 2018, the disbursed amount regarding projects of economic and social
development is:
Group of projects Currency Loan
amount,
mln
Used
funds,
mln
% of the
sample
1. Joint development projects
with the World Bank
with the European Bank for
Reconstruction and Development
3. Joint development projects with
the European Investment Bank
with the Reconstruction Credit
Institute (KfW)
5. Joint projects with the Nordic
Environmental Finance
Corporation (NEFCO)
US dollar
Euro
Euro
Euro
Euro
2 403
1 577
3 217,54
207,5
30
591
756
501
10
-
24,6%
47,9%
15,6%
4,9%
0,0%

UKRAINE 2018–2021
52
The increasing of the current level of the disbursed amount under the projects of economic and
social development of Ukraine supported by the IFI is inextricably linked with the reorganization of the
work of the Ministry of Finance of Ukraine regarding structural transformations and optimization of the
approaches to fulfill the key functions and procedures.
During the 2018-202, the following key objectives are defined:
Establishing a system for monitoring the implementation
of the projects supported by the IFIs
Bringing the disbursed amount of projects with the IFIs
to the planned indicators according to the system of
effective control and supervision of the status of project
implementation
Operational testing of the module “Register of economic
and social projects development of Ukraine supported
by IFIs”
Transparency and access to the information on financing
and use of credit funds under the projects supported by
the IFIs
Elaboration of the action plans of cooperation of
the Ministry of Finance of Ukraine with every IFI and
establishment of problem-solving mechanisms
Enhancing the interaction with the IFIs, improving the
communication between the IFIs, principal performers
and other key stakeholders
Staff capacity development for the principal performers
and beneficiaries to increase the effective cooperation
with IFIs
Strengthening the institutional capacity of principal
performers and beneficiaries within the projects
supported by the IFIs through the training and learning in
the partnerships with the IFIs
Increasing the share of the projects in the national
currency financing by the IFIs
Increasing the ability to finance projects by the local
budgets and reduce the vulnerability to exchange rate
shocks
Legislative support for direct foreign borrowing by local
governments
Increasing the share of investment projects implemented
by the local self-government bodies

Ukraine Ministry of Finance Strategic Plan 2018-2021

Ukraine Ministry of Finance Strategic Plan 2018-2021

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Ukraine Ministry of Finance Strategic Plan 2018-2021