31 July 2024, Wednesday, 11:34 215

Bill to raise taxes will discriminate against bona fide taxpayers – American Chamber of Commerce

Editor: Roman Vaniyan

Читати українською

Share:
Copied

The American Chamber of Commerce in Ukraine believes that Bill 11416 on raising taxes will significantly discriminate against bona fide transparent taxpayers while tolerating tax evaders and expanding of shadow economy.

This follows from a statement by the organization, the Ukrainian News agency reports.

“Any proposed changes must reflect sound tax policy and a commitment to ensuring tax compliance and pursuing tax justice. Unfortunately, the recently proposed draft tax policy changes (Draft Law #11416) do not meet these objectives and, instead, are expected to lead to further discrimination against transparent businesses, increase distortion in competition between taxpayers and tax evaders, undermine trust, and promote the expansion of the shadow economy,” the statement says.

According to the statement, the most alarming in the proposed tax changes is the proposed 1% revenue tax to be applied against corporate revenues.

“This is a dangerous precedent that should not be introduced as it is a completely new sales tax alongside the existing VAT regime. To our knowledge, no country in the world has a sales tax and VAT regime simultaneously as is being proposed in Ukraine. We have no doubt that proceeding as proposed will increase the overall tax burden substantially on bona fide taxpayers who report their revenues in a transparent and legitimate manner, incentivize shadow economy participants to double down on their efforts to evade taxes as the stakes are even higher, create significant difficulties for doing business in Ukraine, discourage existing businesses from investing further as well as make new investors reconsider business plans, decrease Foreign Direct Investment (FDI), reverse de-shadowing of Ukraine’s economy and increase the cost of administering taxes,” believes the organization.

The Chamber also opposes discriminating against bona fide, legitimate taxpayers through the introduction of new taxes, such as the proposed excise tax in EUR on flavored carbonated waters, which is targeted primarily at U.S. and international companies.

At the same time, according to the statement, a sharp one-time increase in the military tax to 5% is likely to result in a decrease in real wages while increasing the attractiveness of informal employment.

“We also welcome the Government’s determination to level the playing field by avoiding unfair competition by businesses that avoid taxes or benefit from preferential treatment. To that end, initiatives like the removal of the 150 EUR limit on cross-border e-commerce, making all such parcels subject to VAT, is a step in the right direction as this is consistent with EU and international practice and will increase taxes collected materially,” the statement says.

The Chamber firmly believes that the source for additional tax revenues is in combatting evasion and ensuring equal rules for all, not increasing taxes on legitimate taxpayers who already bear the highest burden.

At the same time, discrimination against legitimate taxpayers will damage transparent businesses and significantly increase the shadow economy.

As the Ukrainian News agency earlier reported, in mid-July, the Cabinet of Ministers approved bills offering to raise taxes worth a total of UAH 140 billion before the year end while the defense and security fees by UAH 495.3 billion.