It's complicated. The Business Council and the government failed to reach a consensus on tax increases
Kyiv • UNN
The first consultations between business and the government on tax increases were held. No consensus was reached, and the parties agreed to continue the dialog next week in a Verkhovna Rada committee.
The first round of consultations between business, experts and the government on the government's initiative to raise taxes has taken place. There is no final version of the tax increase yet, and consultations will continue, UNN reports .
Details
The Presidential Council for Support of Entrepreneurship under Martial Law met with government officials on Wednesday to discuss government draft law No. 11416, which provides for tax increases.
The meeting, which lasted more than 2.5 hours, was attended by Prime Minister Denys Shmyhal, First Deputy Prime Minister of Economy Yulia Svyrydenko, Finance Minister Serhiy Marchenko, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy Danylo Hetmantsev, and Head of the Presidential Office Andriy Yermak. The business communicated with the government in a closed-door session, without journalists.
Following the meeting, Prime Minister Denys Shmyhal said that no consensus had been reached.
We agreed that this is the beginning of a dialog. We will work together on the basis of the Verkhovna Rada Committee to find the most effective solutions as soon as possible. Business has a say and influence on all these decisions
At the same time, he said, the government understands that the proposed tax increase could be a challenge for businesses.
According to Oleg Gorokhovsky, a member of the Business Council and co-founder of monobank, business representatives during the meeting tried to understand whether the Cabinet of Ministers had used all the opportunities to optimize budget expenditures and increase revenues.
He added that during the conversation, the Business Council members emphasized several issues. In particular, they expressed concern that the tax increase would lead to the shadowing of the economy and the destruction of small and medium-sized businesses, and would ultimately have a very short-term effect, after which taxes would be collected even less than now.
In addition, according to him, the Business Council believes that as long as a large number of large and very large businesses use the split into individual entrepreneurs, salaries in envelopes, holes in customs, and excise tax evasion, there is no point in raising taxes, and the government should focus on their administration and fairness in paying them by all.
We talked about economic mobilization, which can bring billions of hryvnias to the budget. We asked why importers in the country are living better than exporters today, given the deeply negative foreign trade balance. We also raised a number of other issues, from liberalizing the virtual asset market to selling property confiscated from the Rashkas,
He noted that representatives of the Government and the Ministry of Defense explained that the additional UAH 500 billion will be used this year to pay salaries to the military (60%) and purchase weapons, equipment and other expenses (40%).
UAH 500 billion is planned to be raised from various sources: - almost 3/4 of it is an increase in domestic borrowing, as well as an overperformance of existing state budget revenues, including through the de-shadowing of the economy; - about 1/4 is a tax revision,
He added that business and the government agreed to continue consultations on tax increases next week at the Verkhovna Rada Committee on Finance, Taxation and Customs Policy. "It's complicated..." Gorokhovsky summarized.
At the same time, Danylo Hetmantsev, chairman of the Rada's tax committee, hinted after the meeting with the business that no matter how the consultations end, Ukrainians will not be able to avoid a tax increase.
Together with the country's leading think tanks , we discussed the draft law N11416 of the Cabinet of Ministers on tax increases. Constructively and with an understanding of all the circumstances of a difficult but unavoidable decision. We all understand that the decision is painful but necessary,
According to Mr. Hetmantsev, the Business Council members had the most questions about the increase in the military fee and the introduction of the turnover tax.
"Together with the Ministry of Finance, we discussed possible alternatives to VAT and the abolition of certain privileges. We instructed the Ministry of Finance to work on it," said the chairman of the Rada's tax committee.
According to Nina Yuzhanina, a member of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, it is not yet clear whether the government will cut spending and fight the shadow economy, thus increasing state budget revenues.
Recall
The government has submitted draft laws to the Verkhovna Rada to raise taxes and amend the state budget for 2024. The Cabinet of Ministers proposes to increase the military tax rate to 5% and to 30% for some transactions. Danylo Hetmantsev, Chairman of the Parliamentary Committee on Finance, Taxation and Customs Policy, supported the government's initiative, noting that he sees no other options than to accept the Cabinet's proposal to raise certain taxes (military duty, excise taxes, in particular on fuel and tobacco), increase the relevant tax base, and place more government bonds, which may also include NBU issuance.
Yes, this is a bad decision that will hinder economic recovery, the growth of citizens' incomes, and potentially pose risks to macro-financial stability. However, there is no other way to close the gap in the military now, because in a few months we will face a significant shortfall in the current maintenance of the army, which will begin to deepen sharply by the end of the year,
The head of the Rada's tax committee has repeatedly voiced the idea of raising taxes in Ukraine. According to economic expert Yuriy Havrylechko, the elimination of the tax and customs services and the transfer of the economy to martial law may be an alternative to Hetmantsev's idea of raising taxes to close the budget gap.
Add
The draft law, which envisages a tax increase, was criticized earlier by Yaroslav Zheleznyak, deputy chairman of the parliament's tax committee. According to him, it is not clear why such tax changes are proposed and what calculations they are based on.
In addition, mobile operators operating in Ukraine believe that if the parliament supports the government's initiative and raises taxes, it will be a step backward in the availability of mobile communications, which is critically needed in times of war.
Ukrainians in a poll conducted by UNN, advised the authorities to fight corruption first, instead of raising taxes. They believe that an increase in the tax burden could lead to a decrease in donor support for the army.
