Members of the Ukrainian Business Council, which includes 117 business associations from various sectors of the economy, claim that tax increases will reduce economic activity and increase corruption. With a corresponding statement, they addressed the representatives of the government and the Verkhovna Rada, RegioNews reports.
The URB reminds that on July 18, 2024, the draft Law of Ukraine No. 11416 “On Amendments to the Tax Code of Ukraine and other laws of Ukraine regarding the peculiarities of taxation during martial law” (hereinafter referred to as the draft law) was registered in the Verkhovna Rada of Ukraine, which aims to should increase the inflow of funds to the State Budget.
According to URB experts, the said draft law has a number of negative norms for the stable operation of enterprises and the economy (in particular, increased military tax for employees, tax on the turnover of enterprises, military tax on jewelry and cars), because it mostly puts a burden on conscientious businesses and employees .
“The developers of the draft law do not take into account the negative consequences of its adoption, which will be a decrease in business activity, which will lead to a decrease in the general tax base, an increase in the risks of shadowing the economy and the implementation of various tax optimization schemes, which automatically raise the risks of corruption,” the appeal reads.
The URB also believes that the introduction of new types of taxes will significantly burden business and state bodies with additional forms of reporting, the need to implement new administration and control procedures, and will cause additional fiscal pressure on Ukrainian business.
“Against the background of the continuation of Russian aggression, the destruction of infrastructure, the reduction of markets and the outflow of personnel – the above makes economic stability impossible,” the statement reads.
Along with that, as emphasized by the organization, the draft law lacks measures to combat the shadow economy and measures to improve the efficiency of the DPS. Such factors will lead to discrimination of bona fide businesses and contribute to the growth of the shadow economy.
URB specialists, realizing the need to expand the tax base to ensure the financing of the country’s military expenses without introducing new taxes, suggest directing the search for additional revenues in the following areas:
1. Activation of measures to combat the shadow economy and increase the efficiency of the control bodies by implementing systemic changes that will provide additional revenues to the state budget
ensure a complete reboot of the Customs and Tax Services by commissions with a decisive vote of international experts to minimize “shadow schemes” and fill the budget, establish effective CRIs for BEB, DPS, DMS, and ensure annual assessment of losses from various taxes according to the tax gap methodology;
improve the administration of real estate tax and use the full potential of this tax;
automate tax administration processes as much as possible.
2. Reduction of state budget expenditures
review and optimize budget expenditure articles to optimize the structure, increase efficiency and urgently reduce budget expenditure.
3. Involvement of business associations in the development of a new draft law and work out options for finding other sources of income for the budget.
To conduct a joint search for sources of tax revenue for the budget, instead of the innovations proposed by the government that are harmful to the economy – increased military duty for employees, sales tax, military duty on jewelry and cars.
Review approaches to the introduction of new additional fees and their administration, and consider options for the introduction of a temporary surcharge to the already existing tax rates of value added tax.
To specify that the rule on the extension of the powers of local councils regarding the regulation of the minimum tax base for personal income tax applies exclusively to the main place of work when performing the full monthly norm of working hours, making it similar to the minimum base for calculation of the EWS.
Ukrainian business calls on the Government and people’s deputies to take into account the proposals of the business community, conduct a professional discussion of alternatives to filling the budget and possible reduction of expenses, and jointly work out optimal solutions regarding the sources of revenues for the budget.
