The revolutionary nature of ECRs is not only that it is an effective tax administration tool ensuring a fair payment of taxes. The point is also that such IT solutions greatly facilitate the interaction both between businesses and the State Tax Service of Ukraine and between businesses and their customers.

This is the initiative from which the state, bona fide entrepreneurs, and Ukrainian nationals benefit, and in this case, the interests of all of them intersect.

So, what is the benefit?

Free use. Part of the success of any reform is its affordability.

In Ukraine, taxpayers have the opportunity to use e-cash registers, including their free applications for mobile phones and computers, without purchasing classic cash registers.

Hence, businesses should not spend money on purchasing ECRs and paying for their maintenance.

To date, with the support of the EU4PFM Programme, technical requirements have been detailed to improve the free solutions developed by the State Tax Service and to create applications for IOS and web-version. Furthermore, the Programme will also support the development and improvement of these IT solutions.

Convenience. The registration of an ECR is easy. It is registered through the taxpayer’s electronic account.

The innovation of an ECR is its mobility. Unlike classic cash registers, e-cash registers are convenient for use in deliveries and itinerant trade. Also, ECRs can be used offline.

Such solutions are very progressive and, last but not least, they significantly reduce the administrative burden on taxpayers in the area of accounting. They enable businesses to apply paperless technologies.

Reliability and transparency. It is fair to say that ECRs can be called one of the most positive elements of the tax culture.

Among other things, they ensure transparency, because the information on sales is automatically transmitted to the fiscal server of the controlling authority. This information, therefore, appears on the taxpayer’s account and in the State Tax Service.

In the future, the State Tax Service will be capable of developing solutions that could help automatically generate tax returns, because information on all transactions performed will be made available.

In this way, the entrepreneur avoids the risk of losing or forgetting something and will not fall under penalties. First of all, it is the taxpayer who will benefit.

On the other hand, the information received enables the tax authority to effectively carry out tax surveillance and implement the risk-based approach.

Digitalization. It is no secret that international success stories are now based on digitization and automation of processes. This saves not only the budget funds on bureaucratic processes but also resources of businesses and public authorities through redirecting them to business and institutional development.

Free choice for entrepreneurs. An important aspect in the introduction of ECRs is that entrepreneurs have a choice whether to use an e-cash register or a classic one. Besides, both e-cash and classic registers can be used in parallel.

Trust of customers. The availability of a cheque ensures the protection of consumer rights and, consequently, the trust of customers in the business. Moreover, the buyer can check online whether the cheque issued is valid.

Using the services of entrepreneurs who work ‘in the shadow’, the consumer agrees to potential adverse effects, such as no warranty for the goods or services, no responsibility of the entrepreneur for possible improper quality, etc.

The international image of the state. The strengthening of tax compliance is not only an internal process but also something that enhances the country’s image in the international scene and boosts its investment attractiveness.

Increase of tax compliance. The uptake of ECRs also makes it possible to expand the scope of their application. In Ukraine, the term ‘fiscalisation’ has taken on negative connotations over the years. The experience of implementing these initiatives in other countries has however shown that ECRs have favorable effects on both society and business.

Let’s consider this primarily at the macroeconomic level. First of all, this approach aims to strengthen tax compliance, helps create fair and equal competition conditions for businesses.  

It is due to the payment of taxes that the developed world economies have the opportunity to provide decent pensions for parents, high-quality education for children, social security in the event of unemployment or illness, build and upgrade the infrastructure.

Since shadow businesses do not pay taxes to the budget, the state has fewer opportunities to fund social security and development programs.

At the microeconomic level, the above requirements ensure for some businesses greater fiscal discipline within the business itself, being a key to their further development.

Hence, by gradually bringing the business out of the shadow, the whole state gets the opportunity to prosper and become stronger.

The wider use of ECRs as part of comprehensive measures to increase tax compliance will definitely help achieve this target.

The EU4PFM Programme helps implement the ECR reform in Ukraine by providing expert support in the development of a regulatory framework, methodological recommendations, and financial support for the development and improvement of IT solutions for ECRs.

Paulius Majauskas

Head of the Tax and Customs Duty Administration Division

Ministry of Finance of the Republic of Lithuania