Electronic tickets and certificates will ensure a transparent control system in forestry

30.11.2023 12:51

Launching electronic logging tickets and certificates of wood origin will ensure an effective and transparent control system in forestry.

This is stated in the Report on the results of the performance audit of the exercise of powers by state authorities to ensure control over the timeliness and completeness of the calculation and payment of taxes and other revenues to the state budget by business entities in the field of forestry. The audit was conducted by a member of the Accounting Chamber, Tsezar Ohon.

"Paper logging tickets are no longer issued in Ukraine. The next step is to stop issuing paper certificates of origin for timber. This will enable the customs authorities to automatically check the exporter's primary documents to issue a certificate in the electronic accounting database. Besides, information will be received more quickly when issuing certificates. The appropriate implementation of modern global standards on Ukraine's path to the European Union gives a positive impetus to the forestry development," said Tsezar Ohon.

According to him, Ukraine ranks ninth in Europe in forest area and seventh in timber reserves.

The audit showed that in 2020-2022 and the first half of 2023, the state budget received UAH 2.2 billion in forestry rent (for timber harvested during mainstream logging). However, due to Russia's large-scale armed aggression against Ukraine and the temporary occupation of some territories, despite the 14% increase in the forestry rent rate on 1 January, the revenue from such payments decreased by 11%. By 30 June 2023, the State Forest Resources Agency of Ukraine reported that the amount of losses and damage to state and municipal forestry enterprises due to the war was UAH 1.1 billion. Besides the rent, the state paid UAH 10.7 billion in VAT, UAH 2.2 billion in net profit, and UAH 0.9 billion in income tax for forest use.

The auditors of the Accounting Chamber found that the total amount of accrued taxes increased by 1.7 times (from UAH 2.9 billion in 2020 to UAH 5 billion in 2022) and paid taxes by 1.8 times (from UAH 3 billion to more than UAH 5 billion). The growth is due to a twofold increase in the price per unit of timber products and a 1.7-fold increase in the value of those already sold.

During the control measure, some territorial bodies of the State Tax Service of Ukraine eliminated the violations identified by the audit of the Accounting Chamber, which resulted in UAH 500 thousand to the state budget.

To improve the efficiency of the forestry sector and bring it closer to European standards, the State Specialized Forest Enterprise "Forests of Ukraine" was established in June 2021. The audit showed that in the first half of 2023 alone, it received UAH 11 billion in revenue and paid UAH 2.7 billion in taxes and other revenues to the state budget, almost 90% of the total taxes paid by forest users.

The audit also revealed that significant volumes of illegal logging, damage from its consequences, and failure of state authorities to take adequate measures to identify violations of forest legislation and perpetrators and bring the perpetrators to justice did not contribute to the efficient use of forest resources.

Thus, despite a decrease in the number of detected illegal logging in 2020-2022 (12.3 thousand cases involving 100.7 thousand cubic metres, with the damage caused amounting to UAH 844 million), the level of compensation for damage caused to the forestry sector remains low - only 3% (almost UAH 24 million). No violators were found out of the total amount of illegal logging of UAH 730 million (86.5%).

The audit found that the State Forest Guard, the State Environmental Inspectorate of Ukraine, and law enforcement agencies did not take adequate measures to eliminate violations of forestry legislation. Thus, more than 97% of the damage caused to the forest remained uncompensated, and almost 81% of the claims and lawsuits for damages were not recovered. Nearly 22% of the cases in which damages were not compensated at the time of the Accounting Chamber's audit were referred to the courts.

The situation is similar to the additional taxes and other revenues from documentary audits. Thus, out of more than UAH 369 million, the state budget received only UAH 130 million, or one in three hryvnias.

Due to inadequate control of the State Customs Service, customs offices failed to carry out procedures for bringing perpetrators to justice for violating customs rules. Thus, although the number of violations halved in 2022 compared to 2020, their amounts decreased by 4%, and fines were imposed by almost 36%, the level of their collection remains low (11%). Nearly 32% of violators were not brought to administrative responsibility.

The Audit Report and Decision will be published on the official website of the Accounting Chamber.