It has been almost two weeks since the government bill was registered in the Verkhovna Rada, including proposals to increase taxes. While the business community is aware of the need to strengthen funding for Ukraine’s defense, after the bill’s text was published, experts (such as the American Chamber of Commerce in Ukraine, the Center for Economic Strategy, and other analytical centers) have constructively criticized it.
The lion’s share of revenues is proposed to come from two sources:
- A 1% military fee on the income of legal entities under the general system (essentially a turnover tax in addition to the existing profit tax).
- Increasing the military levy on citizens’ income from 1.5% to 5%.
Thus, the bill creates conditions for disproportionate pressure on honest businesses and workers. Moreover, a new type of turnover tax will complicate already challenging tax administration, creating new corruption risks.
Without delving into the discussion regarding the ways and sources of budget replenishment, the Business Ombudsman Council draws legislators’ attention to the findings that formed the basis of the Council’s last two own-initiative investigations . The Council calls for the following recommendations to be considered in future legislative changes:
- Analysis and forecasting. Before implementing any changes (as mentioned in our investigation on SMKOR regarding procedures for registering tax invoices/adjustment calculations, but this rule can be considered universal), it is necessary to conduct a thorough analysis and forecasting of the impact of the proposed changes, especially possible negative consequences for business, based on factual data. It is essential not only to perform mathematical calculations but also to simulate potential reaction of both honest and dishonest businesses, complexity of administration, etc.
- Implementation of the “Consult First” principle, whose main goal in our investigation regarding tax audits is timely and constant communication with taxpayers. As shown by the reaction of the business and expert community, significant mistakes could have been avoided if discussions had been held first with the involvement of our experts, trusted by both the Ministry of Finance and the relevant committee of the Verkhovna Rada.
The restoration of trust in fiscal authorities, as declared in the National Revenue Strategy, should be achieved through the openness and transparency of decisions.
In this regard, quite eloquent was the official response from the Ministry of Finance to the Business Ombudsman Council about the impossibility of involving our specialists, as well as any other external experts, in the work on auditing the SMKOR system (initiated by the decision of the National Security and Defense Council of Ukraine (NSDC) solely based on the Council’s lack of status as a central executive body). Consensus is built on openness.
