The Cabinet of Ministers is open to compromise on tax legislation, Ukrainian Prime Minister Arseniy Yatsenyuk said at the National Council of Reforms on Dec. 8, signaling a possible end to a standoff on tax reform between parliament and the government.
Noting that the Finance Ministry and
the tax committee of Verkhovna Rada have created two separate draft laws on the
changes to the tax code, Yatsenyuk said, “We will have a single draft. The
cabinet is prepared for complete compromise in order to gain effective tax
reform.”
The prime minister’s comments came
soon after a speech by Ukrainian President Petro Poroshenko, who said he wanted
the new tax legislation to be passed by the end of the year.
The president said the amendments to
the tax legislation, along with the adoption of the budget, are key to
unlocking more vital funding from the International Monetary Fund.
“Today, IMF funding is crucial to
ensure the financial stability of the country,” Poroshenko said.
Poroshenko said the tax amendments
should achieve three goals: stimulate economic development, promote a
substantial reduction of the tax pressure on business and prevent budget
losses.
“We can ensure this by working
together,” Poroshenko said, adding that he had already discussed the issue
with Yatsenyuk, Finance Minister Natalie Jaresko and lawmakers.
Ilya Neskhodovsky, tax expert from
the Reanimation Package of Reforms, a public initiative, told the Kyiv Post
that it was crucial for parliament to pass the tax legislation by the end of
the year, as the budget for 2016 year would be based on the new tax rates.
Some of the new tax rates, he said,
are “clearly lower.”
For instance, the payroll tax will be
halved, to 20 percent.
Few countries have ever lowered taxes
while in a state of war, Poroshenko said, adding that “we have to do this
anyway.”
Poroshenko also said the new
legislation should not “raise tax pressure either on citizens or business.”
Corporate income tax and personal income tax, contrary to previous proposals,
will not be raised. These taxes will be 18 percent in 2016, and reduced to 17
percent in 2017.
But according to Neskhodovsky, the
“complete compromise” announced by Yatsenyuk would not mean meeting parliament
halfway, as the new legislation would be based mainly on the Finance Ministry’s
proposals, with the one exception being the amendments on tax administration.
“There’s the question of tax rates –
how much you pay, and there’s the question of tax administration – the methods
of calculation that could be applied to you,” the expert said. “The latter part
was the one designed by the parliament (tax) committee.”
Altogether, Neskhodovsky called the
new tax draft legislation “rather conservative.”
“We can’t say it will make our lives
any easier,” he said.
Neskhodovsky said that if some
compromise can be reached, part of the new tax legislation could be adopted
this year, while the opposing sides would continue to work on the remaining
issues early next year.
Yatsenyuk said much the same – the
new tax rates are to take effect from Jan. 1, and the reformed tax code will
start operating from April 1.
Kyiv Post
staff writer Alyona Zhuk can be reached at [email protected]
