ROUNDTABLE’S RESOLUTION
Tax Code of Ukraine – a fatal shot in the head?
Tax reform is a cornerstone for breaking the trend of economic decline in Ukraine, turning it into one of the poorest countries in the region.
After the fall of GDP by 6.8% in 2014 and the expected decline by 11% in 2015, Ukraine’s economic performance can be compared to those that unsuccessful African countries demonstrate. The scheduled growth in 2016 and subsequent years, which the government establishes in the macroeconomic policy, allows hoping for a return to the level of economic performance of 2013 only after 2020 that we consider unacceptable for our country.
We, the participants of the roundtable, called “Tax Code of Ukraine – a fatal shot in the head”, support the team of authors of the bill №3357 and insist on decisive changes, the inadmissibility of half steps in reforms. So-called “compromised” version of the tax reform from the Cabinet of Ministers of Ukraine, in our opinion, will not return a weak economy to life and will not lead to significant transformations of relations within the society.
Considering:
that the Cabinet of Ministers’ draft law does not deal with the impact of the implementation of the act and the labor market (Explanatory note to the Law draft of Ukraine “On the creation of competitive conditions in taxation and stimulation of economic activity in Ukraine”), so we do not accept the following components of governmental bill and their consequences are fundamentally such as:
– Fiscal office’s administrative reform – DFS retains the ability to interpret the legislation arbitrarily and independently set rules and procedures for themselves, so the disorder and businesses’ mockery remain;
– The elimination of the tax police (only change of the name) – so a tax terror for business will continue;
– Complicating and limiting the use of simplified taxation of a small business;
– Payroll tax at the rate of 18% tax on individual income + 20% single social contribution + 1.5% military collection – does not create the conditions under which lies the essential shadowing of wages;
– Taxation of dividends at the rate of 18% combined with the income tax at the rate of 18% make the country unattractive for investment;
– Tax profit for the formula of the current legislation will maintain the income tax as corruption, operation will continue to output circuits of capital and tax collection on the principles of so-called “tax burden” through administrative pressure of DFS
– Maintaining discretionary rules allows to shoot a tax credit on formal grounds, for errors in the tax bill and violations of regulations during its registration; providing DFS to influence the priorities of applications for VAT refunds.
Supporting:
Mechanisms of elimination of all the stated shortcomings are considered in the 3357 draft, which seeks to make the Ukrainian tax system one of the best in the region and make a powerful breakthrough in the ease of doing business and the tax burden rankings. Unfortunately, the political inhibition prevents it from progressive norms of the bill to come into effect from the beginning of 2016 – because of the lack of time.
We urge Deputies of Ukraine to make a properly weighted decision regarding the work of the Ukrainian economy in 2016, namely:
1. Urgently take Draft Law №3357 in the first reading. Improving tax legislation and in the future carry out on the basis of this project.
2. To instruct the government on the basis of Bill adopts in a broad dialogue with experts, business, requirements of international financial institutions to hold its revision and adoption in Q1 of 2016 as a result of the social agreement and consensus.
3. To take a 2016 budget based on current tax law considering the decline of the unified social contribution by 40% (coefficient 0.6) and cancelation of the additional import duty with the rate limiting budget deficits approved by the memorandum with the IMF.
4. Continue the moratorium of inquiries of small businesses in 2016.
5. Reconcile with small businesses such format of the simplified tax system that encourages entrepreneurial initiative and employment, while preventing its misuse by big business.
To make a Decision:
Only after following these points, progressive changes will be welcomed by the society, which is the main key to the reforms’success.
While using practices of inconsistent decisions with the society through the Verkhovna Rada of Ukraine, not taking into account these proposals in the resolution of the round table, the public sector will resort to protests, demanding the resignation of the economic bloc of the Government and the Prime Minister of Ukraine.