Ukraine will have all the legal grounds for the economy de-shadowing next year

01/ 04/ 2021

Such expectations were shared by Danylo Hetmantsev, Chairperson of the VRU Committee on Finance, Taxation and Customs Policy, during a meeting with the European Business Association on March 31. Mr. Hetmantsev informed the business that his Committee is actively working on drafting and promoting the adoption of a range of laws on de-shadowing Ukraine’s economy. Particular attention will be paid to the fight against the illegal market of excisable goods (alcohol, tobacco, fuel, cars, etc.), as well as goods from high-risk groups (consumer electronics, medicines, jewelry) and land. According to Mr. Hetmantsev, the efforts of law enforcement agencies are currently insufficient in combatting the smuggling and preventing the grain export schemes without the return of foreign exchange earnings. During the discussion, it was mentioned that the amendments to the Law of Ukraine № 3959-1 provide for the criminalization of the smuggling of excisable goods. In the context of de-shadowing, Mr. Hetmantsev admitted that the most difficult part is proceeding with customs reform but added that some positive signals were nevertheless observed. Thus, the State Customs Service is expected to exceed the budget revenue plan in the first quarter. In response to numerous inquiries from the business, the Committee has drafted a law proposing 1) a gradual reduction in the burden on the payroll, 2) unification of single social contributions, PITs, and military dues into a single tax and 3) extended possibilities for deductions on the tax return. The draft law was submitted to the Ministry of Finance for approval, but so far, no feedback on the draft has been received. Mr. Hetmantsev believes that the tax on withdrawn capital is an ambiguous tool that can negatively affect the structure of the economy. Therefore, it should be implemented only for certain industries, for example, for IT companies within the Diia.City project. There is also a proposal to follow the Polish model of the withdrawn capital tax, which would provide the possibility of transition to such a taxation system for companies with revenues over 200 million UAH per year. The European Business Association supports this position as before introducing such changes in the taxation system, it is important to clearly prescribe the respective compensators. It was also noted that there are no plans for the abolition of the simplified taxation system for FOPs of the 3rd group. However, Mr. Hetmantsev emphasized that measures will be taken to identify actual small businesses from large ones which use FOP-model to reduce the tax burden. This can be done mainly through fiscalization. Besides, a mandatory introduction of cash registers will help in the fight against the shadow market of risky groups of goods. Apart from this, the Committee will reconsider the requirements for the application of PTRs for large taxpayers separately. During the one-and-a-half-hour conversation, we also managed to discuss such issues as changes to the real estate tax, eco-tax reform, inexpediency of introducing excise duty on fuel for inland navigation, risks of establishing the Bureau for Economic Security, restructuring of foreign currency loans, etc. On behalf of the European Business Association, we thank Mr. Hetmantsev and the VRU Committee on Finance, Taxation, and Customs Policy representatives for your active cooperation with business. For its part, the EBA is ready to support initiatives that promote the establishment of equal rules of the game and civilized conditions for doing business. Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

Such expectations were shared by Danylo Hetmantsev, Chairperson of the VRU Committee on Finance, Taxation and Customs Policy, during a meeting with the European Business Association on March 31.

Mr. Hetmantsev informed the business that his Committee is actively working on drafting and promoting the adoption of a range of laws on de-shadowing Ukraine’s economy. Particular attention will be paid to the fight against the illegal market of excisable goods (alcohol, tobacco, fuel, cars, etc.), as well as goods from high-risk groups (consumer electronics, medicines, jewelry) and land. According to Mr. Hetmantsev, the efforts of law enforcement agencies are currently insufficient in combatting the smuggling and preventing the grain export schemes without the return of foreign exchange earnings.

During the discussion, it was mentioned that the amendments to the Law of Ukraine № 3959-1 provide for the criminalization of the smuggling of excisable goods.

In the context of de-shadowing, Mr. Hetmantsev admitted that the most difficult part is proceeding with customs reform but added that some positive signals were nevertheless observed. Thus, the State Customs Service is expected to exceed the budget revenue plan in the first quarter.

In response to numerous inquiries from the business, the Committee has drafted a law proposing 1) a gradual reduction in the burden on the payroll, 2) unification of single social contributions, PITs, and military dues into a single tax and 3) extended possibilities for deductions on the tax return. The draft law was submitted to the Ministry of Finance for approval, but so far, no feedback on the draft has been received.

Mr. Hetmantsev believes that the tax on withdrawn capital is an ambiguous tool that can negatively affect the structure of the economy. Therefore, it should be implemented only for certain industries, for example, for IT companies within the Diia.City project. There is also a proposal to follow the Polish model of the withdrawn capital tax, which would provide the possibility of transition to such a taxation system for companies with revenues over 200 million UAH per year. The European Business Association supports this position as before introducing such changes in the taxation system, it is important to clearly prescribe the respective compensators.

It was also noted that there are no plans for the abolition of the simplified taxation system for FOPs of the 3rd group. However, Mr. Hetmantsev emphasized that measures will be taken to identify actual small businesses from large ones which use FOP-model to reduce the tax burden. This can be done mainly through fiscalization. Besides, a mandatory introduction of cash registers will help in the fight against the shadow market of risky groups of goods. Apart from this, the Committee will reconsider the requirements for the application of PTRs for large taxpayers separately.

During the one-and-a-half-hour conversation, we also managed to discuss such issues as changes to the real estate tax, eco-tax reform, inexpediency of introducing excise duty on fuel for inland navigation, risks of establishing the Bureau for Economic Security, restructuring of foreign currency loans, etc.

On behalf of the European Business Association, we thank Mr. Hetmantsev and the VRU Committee on Finance, Taxation, and Customs Policy representatives for your active cooperation with business. For its part, the EBA is ready to support initiatives that promote the establishment of equal rules of the game and civilized conditions for doing business.

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