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Official Statement regarding Balanced Income Taxation System

16/ 03/ 2018

European Business Association welcomes efforts of the President of Ukraine to find a balanced solution regarding the introduction of a new model of income taxation system.

The EBA is grateful to the President for the invitation to discuss the introduction of a new model of income taxation in Ukraine (click here to see).

We understand the President’s view on the need to provide protection for small and medium-sized businesses. It is expected that such protection will be facilitated by the introduction of the exit capital tax.

Subsequently, the EBA welcomes the President’s idea to extend the exit capital tax on small and medium-sized businesses at the first stage of the introduction of this tax.

Even at the initial stage of the introduction of the new tax, large enterprises should be given a possibility to choose a new model of taxation on their own. It should be noted that the proposed draft law on the exit capital tax provided such a choice only to banking institutions. We believe that it is necessary to expand the number of enterprises that will be entitled to choose the exit capital tax, or remain an income tax payer.

We think that due to the results of the first stage for implementing of exit capital tax it is necessary to generalize experience and evaluate the practice of such tax use. Namely, we need to evaluate the impact of exit capital tax on economy’s unshadowing and economic growth.

Further decisions in terms of exit capital tax must be made by taking such results into account.

Thus, to implement the President’s idea we need to improve the draft law on exit capital tax. More specifically, it is important to allow small and medium businesses use it as well as empower big enterprises choose this taxation model due to their preference.

At the same time, we would like to stress that such changes need to be agreed by all parties. Namely, we want to be sure that tax losses caused by exit capital tax won’t be compensated by raising of other types of taxes.

Moreover, we would like to underline that the decrease of fiscal pressure on salaries must be a priority. Such declining should become an effective tool for economic unshadowing and the raise of citizens’ incomes.

We support the initiative of the President to speed up the temps of economic growth. We do hope that the balanced tax system will become an important factor in achieving these goals.

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