Fiscal pressure on transparent business is unlikely to stimulate economic development

16/ 06/ 2021

Equal and predictable rules of the game are the key to the development of business and the economy and the prerequisite for investment attraction. At the same time, when the rules of the game change every time, the issue of balance and economic recovery can hardly be raised regardless of how progressive the National Economic Strategy 2030 may seem. In early June, the Verkhovna Rada registered draft law №5600, which provides for changes in Ukrainian tax legislation. Prior to the registration of the draft law, the community received the document in working order and submitted its proposals on amendments so that the draft law can improve tax regulation and does not cause significant damage to businesses that already operate and pay taxes to the state budget. At the same time, we see in the registered and published version of the draft law that only some business proposals were considered. However, this is only a small part of the comments that the business submitted for consideration. Our proposals imply the prevention of restriction of the right of large taxpayers to carryforward losses of previous years, regulation of the number of tobacco products in outlets, increase of the excise tax rate on alcoholic beverages and changes in its calculation algorithm, etc. At the same time, among the proposed changes were initiatives in the administration of taxes and fees. Namely, the prevention of temporary restriction of the right of the head of the company to leave Ukraine in case of non-payment of the tax debt within the established terms, reduction of deadlines for registration by VAT taxpayers of a tax invoice, and/or calculation of adjustment to it, reduction of the term for inclusion of tax invoice tax credit from 1095 days to 180 days from the day of occurrence of the tax liability, etc. Detailed proposals at the link. Besides, it should be noted that the draft Law was not publicly discussed, and not agreed with all major business associations in Ukraine. Also, it is worrying that the Government has repeatedly proposed amendments to the Tax Code of Ukraine, which could lead to a violation of the principle of tax legislation stability. Anna Derevyanko. EBA Executive Director. It seems that this draft law is an attempt not to stimulate the development of the economy and business, but simply at any cost to close the hole in the budget by raising tax rates and fees. Obviously, such a decision can hardly be called well-considered or strategic. After all, the issue of, first of all, because of a shadow economy, the lack of equal rules of the game in the country, and so on. These phenomena should be tackled first and foremost, rather than imposing an additional fiscal burden on transparent business. It is especially important to emphasize that constant unforeseen changes to the tax legislation without establishing a sufficient transition period negatively affect the investment attractiveness of Ukraine given the long-term budget planning in companies. According to preliminary information, on June 16 this draft law will be discussed in the Verkhovna Rada Committee on Finance, Tax, and Customs Policy. Therefore, the European Business Association urges not to accept this document even in the first reading but to reject it completely. Instead, there is already one registered alternative draft law №5600-1, which is currently being studied by the business. We hope that among the alternative draft laws there will be at least one that takes into account the interests of business and the state. Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

In early June, the Verkhovna Rada registered draft law №5600, which provides for changes in Ukrainian tax legislation. Prior to the registration of the draft law, the community received the document in working order and submitted its proposals on amendments so that the draft law can improve tax regulation and does not cause significant damage to businesses that already operate and pay taxes to the state budget.

At the same time, we see in the registered and published version of the draft law that only some business proposals were considered.

However, this is only a small part of the comments that the business submitted for consideration. Our proposals imply the prevention of restriction of the right of large taxpayers to carryforward losses of previous years, regulation of the number of tobacco products in outlets, increase of the excise tax rate on alcoholic beverages and changes in its calculation algorithm, etc. At the same time, among the proposed changes were initiatives in the administration of taxes and fees. Namely, the prevention of temporary restriction of the right of the head of the company to leave Ukraine in case of non-payment of the tax debt within the established terms, reduction of deadlines for registration by VAT taxpayers of a tax invoice, and/or calculation of adjustment to it, reduction of the term for inclusion of tax invoice tax credit from 1095 days to 180 days from the day of occurrence of the tax liability, etc. Detailed proposals at the link.

Besides, it should be noted that the draft Law was not publicly discussed, and not agreed with all major business associations in Ukraine. Also, it is worrying that the Government has repeatedly proposed amendments to the Tax Code of Ukraine, which could lead to a violation of the principle of tax legislation stability.

Anna Derevyanko EBA Executive Director

It seems that this draft law is an attempt not to stimulate the development of the economy and business, but simply at any cost to close the hole in the budget by raising tax rates and fees. Obviously, such a decision can hardly be called well-considered or strategic. After all, the issue of, first of all, because of a shadow economy, the lack of equal rules of the game in the country, and so on. These phenomena should be tackled first and foremost, rather than imposing an additional fiscal burden on transparent business.

It is especially important to emphasize that constant unforeseen changes to the tax legislation without establishing a sufficient transition period negatively affect the investment attractiveness of Ukraine given the long-term budget planning in companies.

According to preliminary information, on June 16 this draft law will be discussed in the Verkhovna Rada Committee on Finance, Tax, and Customs Policy. Therefore, the European Business Association urges not to accept this document even in the first reading but to reject it completely. Instead, there is already one registered alternative draft law №5600-1, which is currently being studied by the business. We hope that among the alternative draft laws there will be at least one that takes into account the interests of business and the state.

Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.