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Ukrainian businesspeople have called for early determination of the wording of the announced tax reform and supported a number of provisions of the relevant draft prepared by the Parliamentary Committee on Taxation and Customs Policy. However, they are concerned about fundamental inconsistencies between the position of the Verkhovna Rada of Ukraine (the parliament), the Cabinet of Ministers and the National Reforms Council regarding changes in the simplified taxation system. Business representatives do not support the maintenance of VAT deposit account system, according to which the funds are simply "frozen" and not "injected" into the real economy; while insisting on reducing the burden on the payroll fund and more. Such topics were discussed at a round table talk devoted to "Prospects for the development of small businesses in the context of tax reform" held at the ULIE with the participation of Chairperson of the Parliamentary Committee for Taxation and Customs Policy Nina Yuzhanina, Head of the State Regulation Service Ksenia Liapina, Head of the Council of Entrepreneurs at the Cabinet of Ministers of Ukraine Leonid Kozachenko.
"The business community is extremely concerned that due to the need to develop the 2016 state budget on a new tax basis, interfering with tax modernization results in uncertainty with the budget developing process. It damages the fragile investment climate in Ukraine, whereas it becomes impossible to predict the economic outlook for 2016, to work out an efficient financial plan, tactics and strategy of operation in the domestic and foreign markets," ULIE President Mr. Kinakh emphasized.
The roundtable participants noted that the model of the fiscal policy modernization proposed by the Ministry of Finance was completely unacceptable, because the standards set in the policy, including tax rates, would force businesses into the "shadow" economy. As is known, the model proposed by the ministry states that four key tax rates are set at the same level of 20%, which substantially increases the fiscal pressure on business.
"The problems accumulated in the Ukrainian economy should not be solved by increasing the fiscal pressure, but improving a business climate. Therefore, it is necessary to find ways of stimulating the budget revenues. Against the background of the low financial solvency of the population and unfavorable conditions of business operations, administrative, fiscal methods will only reverse the negative effect," according to Anatoliy Kinakh.
He believes the best efforts must be undertaken to maintain the simplified taxation system. This has been repeatedly emphasized by the ULIE and the Anti-Crisis Council of NGOs, because this is the main incentive for conducting own business, the source of the middle class formation - the key to economic development and democratic reforms in such country. Small and medium-sized businesses, self-employment are currently a lifeline for people, because a large-scale Ukrainian industry is facing a crisis, which, similar to relevant processes of economic modernization and market diversification, leads to spare labor force. It is precisely small businesses that are able to stir the necessary pick-up in economic activity, solve the unemployment problem, and the functioning of goods and service markets. It would be suicide to create a hindrance at the state level.
"We share the concern of the International Monetary Fund (IMF) regarding the national tax policy but are convinced that our discussion should not go in a one-way direction." Our international partners have to take into account Ukrainian fundamentals and support the postulate that only a sound and sustainable economy will ensure constant revenues to the budget," the ULIE President said.
Experts and entrepreneurs stressed the need for an actual reduction in taxes and fees, as well as administration simplification and the introduction of personal responsibility of fiscal officials for misconduct in relation to entrepreneurs.
In order to develop reasonable tax changes, it was decided to hold an additional expert meeting with businessmen from different spheres at the Parliamentary Committee on Taxation and Customs Policy.
"We have not much time to simulate a dialogue - we need clear concerted actions involving the public, experts and authorities. The acute need for the effective tax reform is attributed to significant problems faced by entrepreneurs - decline in the output and exports, depletion of working capital for an estimated amount of UAH 46 billion through advance payments of income tax and negative VAT balances, as well as the lack of access to credit funds," as noted by Anatoliy Kinakh.
The ULIE has already appealed to the President of Ukraine to assist in the speedy and genuine modernization of the tax system. It was noted that the continued absence of a comprehensive fiscal reform harms the business and investment climate of the country, resulting in job losses, shifting into the "shadow" economy and worsening of living standards. The ULIE, together with the Anti-Crisis Council of NGOs stated their demands to the government to conduct, involving public participation, a transparent and urgent modernization of the tax system and on its basis to develop the 2016 state budget properly and in a timely manner.