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Representatives of the business community believe bill No. 3357 on tax liberalization as proposed by the parliamentary committee to be compromise which needs further improvement in dialogue with representatives of the business community. However, they clearly opposed a model of fiscal reform that was proposed by the Ukrainian Finance Ministry. This model is a failed attempt at "improving" the tax system, as noted in the statement issued by the participants of the round table talk devoted to "Prospects for the development of small businesses in the context of tax reform," held at the ULIE.
"The tax reform model of the Ministry of Finance of Ukraine is unacceptable for businesses. The flat tax rates proposed by the Finance Ministry will increase the tax burden on small business. The Finance Ministry proposes failed recipes of "improving" the simplified [taxation] system. This reform will not encourage small business to come “out of the shadows” and will not in general help to “de-shadow” the economy, which is a major shortcoming of the proposed model and challenges the appropriateness of the proposed tax changes," the President of ULIE Mr. Kinakh said.
According to industrialists and entrepreneurs, the Finance Ministry cannot be the sole ideologist of a fiscal policy, because it is primarily concerned with replenishing the state budget, leaving the issues of further development of the economy, industry, small businesses beyond its attention. To take everything away from businesses today, and tomorrow, whatever happens, is a false philosophy. "Squeezing out" the resources of entrepreneurs who manufacture goods, pay taxes, create jobs, and, thus, create a strong basis for the development of the economy, would only exacerbate the crisis, lead to production curtailment, loss of the "top brains", and poverty. The fiscal policy needs a comprehensive modernization for stimulating the development of free enterprise, and non-existence of such policy is a significant reason for the economic downturn.
The statement notes the inadmissibility of two competing centers to develop the tax reform - the Ministry of Finance of Ukraine and the Verkhovna Rada Committee on Taxation and Customs Policy. According to the ULIE, the development of documents having a crucial importance for the country’s economy does not need rivalry within the authorities, but a coordinated and systematic cooperation of all the stakeholders – the government and its individual ministries, the parliament, organizations, business community. At this, the finalization of the process should see a consensus.
Industrialists are worried about the uncertainty regarding the procedure of passing tax bills, which has been agreed by the Verkhovna Rada of Ukraine, as well as adopting the State Budget for 2016, and a possibility of the backstage "bargaining" regarding the basic parameters of tax changes in the Ukrainian parliament when drafting the state budget for 2016. In their view, interference in the approval of the tax reform and the state budget to rely on it as the basis, may deter potential investors from Ukraine and deprive business of predictability and confidence in future.
"Against the backdrop of a difficult situation caused by the ongoing external aggression against Ukraine, scarce resources needed to resume economic growth, weakened competitiveness of domestic exports, it is inadmissible to protract with the adoption of a consolidated position regarding the principles of the tax reform. These decisions are too important for Ukraine, and the "bargaining" is inappropriate," according to Mr. Kinakh.
The statement sets forth a demand to hold a more transparent and responsible dialogue in the format that will include the government, the Ukrainian parliament and the IMF in order to substantiate a tax reform project proposed by MPs, which provides for deeper and systemic forecasting and analytical calculations.