Appeal as for the preparation of changes in TAX laws

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Appeal as for the preparation of changes in TAX laws


The Anti-Crisis Council of Non-Governmental Organizations of Ukraine,

The Ukrainian League of Industrialists and Entrepreneurs

Regarding the Preparation of Tax Law Changes

The industrial and business community has once again been forced to sound the alarm as the so-called tax reform is being prepared in haste, in a non-transparent way and behind closed doors. There are no signals from the government on proposals put forth by businesses on priority amendments to the Tax Code and the reorientation of its content from honestly fiscal to an incentive system for production have been heard. This dilutes the essence of reforms and deepens the distrust of businessmen in the authorities, because their silence is seen as ignoring the critical state of their own enterprises. There are growing risks of legally working businesses retreating into the shadows, and this will further deepen the economic crisis.

Under these conditions, we are alarmed over the intentions of the heads of the Finance Ministry and the State Fiscal Service of Ukraine to adopt changes in parliament in an accelerated manner so they can become effective amid the preparation of the state budget for 2016, although the laws of Ukraine prohibit any changes to the tax rules more than six months before the end of the fiscal period.

How the documents that are crucial for the business were being prepared is also surprising. The Finance Ministry was the main agency engaged in the process. It is primarily interested in boosting tax revenue and only wants to strengthen its fiscal position amid the ongoing crisis. The Economic Development and Trade Ministry, which should be closer to real business and promote changes in tax rules on its behalf, was not among the developers of the tax reform.

Alternative changes are being prepared by the Verkhovna Rada Committee on Tax and Customs Policy, though, in our opinion, the efforts of the legislative and executive authorities should be joined in developing such crucial documents, rather than be competitors.

However, the main thing is that both agencies engaged in the development of the amendments have done so without the participation of the business community, associations and organizations of industrialists, entrepreneurs and employers. Formally, the existing pool of experts under the European Business Association and the American Chamber of Commerce in Ukraine, with all respect to our colleagues, cannot represent the entirety of Ukrainian business. The presentation entitled "Tax Reform - Not Only Tax Rates...," which was made by the Finance Ministry, does not indicate that experienced business practitioners were involved, because the document is explicitly conservative. It does not offer qualitative and fundamental changes, and the only positive moments are "more accurate wording and the removal of contradictions" from the old version of the Tax Code.

It seems that such "editorial revision" is not relevant when businesses and society expect qualitative and drastic changes from the government that would help the country get out of crisis and achieve economic growth.

Representatives of the ULIE and the Anti-Crisis Council of NGOs say they believe that the only decent concept of tax reform was proposed by civil activists at a forum on August 20, among which were our experts. This document is still being finalized, but it contains fundamental requirements: the introduction of a full-fledged "electronic cabinet" for taxpayers, the cancellation of the "plan of penalties" for the violation of tax laws, the introduction of the responsibility of officials for misconduct and full compensation of damage, the disbanding of the tax police, the distribution of tax collection functions, investigation of tax crimes, an improvement in electronic administration of all taxes and fees, tax-based investment incentives, and a reduction in the load on the payroll fund to 20%.

We demand that those representative of the Finance Ministry and the Verkhovna Rada's committee who are responsible for the development of the tax reform should use the document prepared by the business community as a basis and hold a broad debate on proposed changes in the tax system involving organizations and associations of industrialists, entrepreneurs and employers.

We strongly oppose a formal approach to the debate, when the government allows everyone  interested to have their say in order to let off steam, but then it ignores further meaningful reform-related initiatives put forth by the community.

We do not welcome the authorities working behind closed doors and strongly demand effective, equitable dialogue between the government and businesses to demonstrate mutual respect. The adoption of decisions that are crucial for social and economic development in a democratic state cannot be non-transparent and anti-democratic.

There is no time for our country, which is facing the most difficult economic crisis it ever has, to correct mistakes and take intermediate, inaccurate decisions. It's time to act decisively and professionally, and it can be done only when there is experience and knowledge of the industrial and business community. We are waiting for the government to introduce qualitative and fundamental changes that will ensure economic growth, attract investment, ensure large-scale changes in the social sphere, successful entry to the European markets (a free trade zone with the EU will become effective as of January 1, 2016), and fundamentally different relationship between the state and businesses.