Tax increase may negatively affect defense capability, as business donates about UAH 200 billion to the army annually - expert

The tax increase will have a negative impact on Ukraine's defense capability, as Ukrainian business annually donates about UAH 200 billion to the army, which goes directly to the army. This was stated at a press conference by Andriy Dligach, Doctor of Economics, CEO of Advanter Group, UNN reports.

These figures are not officially discussed, because no one counts these figures, we have only done modeling. So, medium, large, and small businesses donate about UAH 200 billion a year. If this money is taken away from business by increasing taxes, the efficiency of using this money will decrease significantly, because now UAH 200 billion goes directly to the army in the form of purchased ammunition or weapons. And how will it get through the state bureaucracy, the efficiency of public procurement, and corruption schemes? How much of this money will eventually reach the army? So is it worth destroying business in this way, destroying our defense capability?

He noted that 35% of salaries in Ukraine are currently in the shadow, including due to chaotic mobilization, which forces men to work unofficially. Therefore, according to Dligach, mobilization and reformatting of the tax system should be carried out in such a way as to facilitate de-shadowing.

According to him, if tax increases are to be considered to increase budget revenues, they should include an increase in excise rates, an increase in real estate and land taxes, provided that the sector is put in order, and a temporary increase in VAT.

In addition, Dligach believes that in order to increase budget revenues, the State Tax Service should be reformed to change tax administration and reduce pressure on business.

In his opinion, a radical reform of customs, an audit of the use of public funds for the maintenance of security forces, and the introduction of economic reservations from mobilization will also have a positive effect.

The expert noted that the main idea that the state should now pursue is economic growth, which will allow for more budget revenues, rather than actions that are now "squeezing the cow - business" and will not allow entrepreneurs to be a systemic supplier of financial resources in the next stage.

"You can't kill business to get the UAH 500 billion (that the budget lacks - ed.) right now," Dligach emphasized.

In general, this draft law (on tax increases - ed.) and the whole idea require a detailed and professional discussion. We do not support the vast majority of the proposals that have been put forward. Instead, we have alternative proposals

He noted that the analysts' proposals have been submitted to the Ministry of Finance and hopes that the discussion will take place.

"For this year, the proposed changes, taking into account all the factors that we can model, will result in UAH 137 billion in increased tax revenues. Next year - about UAH 320 billion, instead of the hundreds that the Ministry of Finance is currently counting. Because we need to take into account the effect (of tax increases - ed.) of increasing shadowing, reducing investment, slowing down business activity, complicating business activities, and this primarily concerns such a tax as the turnover tax, which contradicts everything we can say," Dligach said.

Recall

The government has submitted to the Verkhovna Rada draft laws on tax increases and amendments to the state budget for 2024. The Cabinet of Ministers proposes to the Parliament to increase the military tax rate to 5%, and for some transactions to 30%. Danylo Hetmantsev, Chairman of the Verkhovna Rada 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 macrofinancial stability. However, there is no other way than to close the gap in the military now, because in a few months we will face a significant shortage of funds for the current maintenance of the army, which will begin to deepen sharply by the end of the year," Hetmantsev wrote .

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 tax and customs and the transfer of the economy to a war footing may be an alternative to Hetmantsev's idea of raising taxes to close the budget gap

Add

Earlier, the draft law that envisages tax increases was criticized by Yaroslav Zheleznyak, deputy chairman of the parliamentary tax committee. According to him, it is not clear why such tax changes are proposed and what calculations they are based on.