TAXATION OF CENTRALISED DRINKING WATER SUPPLY SERVICES WITH VALUE-ADDED TAX
DOI:
https://doi.org/10.33042/2522-1809-2024-2-183-48-54Keywords:
value-added tax, drinking water supply, utility company, tariff, cost price, reduced rateAbstract
The scientific article is devoted to the issue of reducing the tax burden on such a socially important service as a centralised drinking water supply.
The study has determined that the service of centralised drinking water supply is an essential component on the way to achieving universal and equal access to safe and affordable drinking water for everyone in Ukraine.
The research shows that the legal form of the utility company as a service provider is the most common for providing water supply services. This form best allows local self-government bodies to conduct their tasks and obligations in the drinking water supply.
The study revealed the main features of the water supply service. We established that the service has great social significance and that its main task is not to make a profit but to provide consumers with quality drinking water in sufficient quantity and at an acceptable cost level.
Despite its significant social value, the drinking water supply services are subject to value-added tax at the usual rate of 20%. The study found that the drinking water supply services generate significant added value, which results in service providers paying substantial amounts of value-added tax to the state budget. We concluded that such a situation does not correspond with the spirit of providing the population with drinking water and is unacceptable for a heavily subsidised service with many chronic problems, including high levels of deterioration of water supply infrastructure and low coverage of rural areas with centralised water supply.
Further, we carried out an analysis of the legislation of the European Union regarding the taxation of water supply services with value-added tax. We determined that most countries of the European Union use the practice of applying a reduced value-added tax rate for the taxation of water supply services.
The obtained results justify the further necessity to study the issue of making changes to the tax legislation of Ukraine to apply a reduced value-added tax rate or complete exemption from taxation of the value-added tax for centralised drinking water supply services.
References
Sorokovska, S. V. (2017). Essence and context of the state policy in the sphere of drinking water supply. Derzhavne upravlinnia: udoskonalennia ta rozvytok, (5). http://www.dy.nayka.com.ua/?op=1&z=1082 [in Ukrainian]
Tsvietkova, A., Vykhryst, S., & Rakhimova, T. et al. (2013). The situation with the equal right to water and sanitation in Ukraine: results of a pilot self-assessment project. TOV “RIA ‘Blits’” [in Ukrainian]
Sorokovskyi, V. Ye. (2009). Decentralisation in action: increasing the capacity of communities to provide services: methodological guide. TOV RPTs “Zoloti Vorota”. https://despro.org.ua/upload/Decetralization%20in%20Action%20Book.pdf [in Ukrainian]
Swiss-Ukrainian Decentralisation Support Project (DESPRO). (2020). Water supply and sanitation in small communities in Ukraine: directions for change. A strategic policy proposal. DESPRO. http://despro.org.ua/images/WSS_Policy_position_paper_DESPRO_UKR-edit%20(1).pdf [in Ukrainian]
Volokhova, I. S., Dubovyk, O. Yu., & Slatvinska, M. O. (2019). The tax system: study guide (I. S. Volokhova, O. Yu. Dubovyk, Eds.). Disa plius. http://dspace.oneu.edu.ua/jspui/handle/123456789/9274 [in Ukrainian]
Krysovatyi, A., & Hutsul, I. (2015). Fiscal effectiveness of VAT on imports at Ukrainian customs area. Economist, (5), 7–9. http://nbuv.gov.ua/UJRN/econ_2015_5_3 [in Ukrainian]
Perevozniuk, V. V. (2011). Optimisation of financial support for water supply and sanitation enterprises in Ukraine. Sustainable development of economy, 5(8), 291–296. http://dspace.wunu.edu.ua/bitstream/316497/17265/2/Оптимізація%20фінансового%20забезпечення%20ВКП%2C2011%2B.pdf [in Ukrainian]
United Nations General Assembly. (2010, July 28). Resolution 64/292. The human right to water and sanitation. UNGA. https://documents.un.org/doc/undoc/gen/n09/479/35/pdf/n0947935.pdf?token=x84VD4IZi6ufFCeZGk&fe=true
United Nations General Assembly. (2015, September 25). Resolution 70/1. Transforming our world: the 2030 Agenda for Sustainable Development. UNGA. https://www.un.org/en/development/desa/population/migration/generalassembly/docs/globalcompact/A_RES_70_1_E.pdf
Verkhovna Rada of Ukraine. (2024, March 8). Economic Code of Ukraine: Code of Ukraine dated January 16, 2003, No. 436-IV. https://zakon.rada.gov.ua/laws/show/436-15#Text [in Ukrainian]
National Commission for State Regulation of Energy and Public Utilities. (2023, December 11). Register of entities operating in the energy and public utilities sectors regulated by the National Commission for State Regulation of Energy and Public Utilities, as of January 31, 2024. https://www.nerc.gov.ua/reyestri-nkrekp/reyestr-subyektiv-gospodaryuvannya-yaki-provadyat-diyalnist-u-sferah-energetiki-ta-komunalnih-poslug-diyalnist-yakih-regulyuyetsa-nkrekp [in Ukrainian]
Ministry of Development of Communities, Territories and Infrastructure of Ukraine. (2023). National Report on the Quality of Drinking Water and the State of Drinking Water Supply in Ukraine in 2022. https://mtu.gov.ua/content/nacionalna-dopovid-pro-yakist-pitnoi-vodi-ta-stan-pitnogo-vodopostachannya-v-ukraini.html [in Ukrainian]
Sorokovska, S. V. (2018). The state policy in Ukraine in the sphere of drinking water supply in the context of global sustainable development goals. Bulletin of the National Academy of Public Administration under the President of Ukraine. Series “Public Administration”, 2(89), 34–40. http://nbuv.gov.ua/UJRN/vnaddy_2018_2_7 [in Ukrainian]
United Nation. (2010). The human right to water and sanitation. https://www.un.org/waterforlifedecade/pdf/facts_and_figures_human_right_to_water_eng.pdf
Romaniuk, Yu., Hladun, Ye., & Ivchenko, O. et al. (2022). Consolidated budget revenues for 2021. Ministry of Finance of Ukraine. https://mof.gov.ua/storage/files/Zvit_2021_%D1%81%D0%B0%D0%B9%D1%82.pdf
National Commission for State Regulation of Energy and Public Utilities. (2022, February 2). Tariff structure of the ME “Ivano-Frankivskvodoekotekhprom”. http://surl.li/qnirn [in Ukrainian]
ME “Ivano-Frankivskvodoekotekhprom”. (2022, December 31). Statement of financial position for 2022. http://surl.li/qnizo [in Ukrainian]
National Commission for State Regulation of Energy and Public Utilities. (2022, February 2). Tariff structure of the ME “Pavlohradske VUVKH”. http://surl.li/qnjqx [in Ukrainian]
Maksymchuk, M. (2023, July 10). “We will last another two or three months”. Why water utilities are sounding the alarm over tariffs and who is to blame for rusty tap water. Economic Truth. https://www.epravda.com.ua/publications/2023/07/10/702043/ [in Ukrainian]
Government Office for Coordination of European and Euro-Atlantic Integration of Ukraine. (2023, December 14). Report on the results of the initial assessment of the state of implementation of the European Union acquis (ACQUIS EU). https://eu-ua.kmu.gov.ua/wp-content/uploads/Zvit_UA.pdf [in Ukrainian]
European Union. (2022, July 1). Council Directive 2006/112/EU of 28 November 2006 on the common system of value added tax. Verkhovna Rada of Ukraine. https://zakon.rada.gov.ua/laws/show/994_928#Text [in Ukrainian]
Swiss Agency for Development and Cooperation (SDC). (2021, December 23). Managing water resources sustainably. https://www.eda.admin.ch/deza/en/home/themes-sdc/water/water-food.html
Marosa Ltd. (2024). VAT in Europe. https://marosavat.com/vat/
World Bank, Government of Ukraine, European Union, & United Nations. (2023, March). Ukraine Rapid Damage and Needs Assessment: February 2022 – February 2023 (A. Himmelfarb, Ed.). World Bank Group. https://documents1.worldbank.org/curated/en/099184503212328877/pdf/P1801740d1177f03c0ab180057556615497.pdf
Downloads
Published
How to Cite
Issue
Section
License
The authors who publish in this collection agree with the following terms:
• The authors reserve the right to authorship of their work and give the magazine the right to first publish this work under the terms of license CC BY-NC-ND 4.0 (with the Designation of Authorship - Non-Commercial - Without Derivatives 4.0 International), which allows others to freely distribute the published work with a mandatory reference to the authors of the original work and the first publication of the work in this magazine.
• Authors have the right to make independent extra-exclusive work agreements in the form in which they were published by this magazine (for example, posting work in an electronic repository of an institution or publishing as part of a monograph), provided that the link to the first publication of the work in this journal is maintained. .
• Journal policy allows and encourages the publication of manuscripts on the Internet (for example, in institutions' repositories or on personal websites), both before the publication of this manuscript and during its editorial work, as it contributes to the emergence of productive scientific discussion and positively affects the efficiency and dynamics of the citation of the published work (see The Effect of Open Access).
