Ukraine’s parliament approved on June 15 a tax amnesty bill that will let people voluntarily declare untaxed assets by paying a one-time fee to the state budget over the next 12 months.
In total, 243 lawmakers voted for the bill, initiated by President Volodymyr Zelensky, in its final reading.
Advocates of the law believe that it will de-shadow Ukraine’s economy and help to collect additional budget revenue, but the International Monetary Fund (IMF) has expressed skepticism that the law will bring in revenue or change taxpayer behavior.
Ukrainians who have accumulated assets but failed to pay taxes on them, can declare them voluntarily from Sept. 1, 2021 to Sept. 1, 2022, pay a one-time fee and escape punishment for tax evasion.
People can declare real and movable property, money and securities without mentioning sources of their profits.
The law stipulates that people will have to pay a 5% fee for assets held in Ukraine that they declare voluntarily. There is a higher rate of 9% for assets held abroad and a lower rate of 2.5% for investments in Ukrainian government bonds.
Assets worth less than Hr 400,000 ($14,900), apartments less than 120 square meters, houses less than 240 square meters, non-residential property less than 60 square meters and cars with less than 3,000 cubic centimeters engine and small land plots don’t fall under the law.
The law doesn’t apply to top officials as president, lawmakers who served from Jan. 1, 2010, or anyone under sanctions or criminal investigations.
But critics are skeptical about tax amnesty in Ukraine since international experience shows that it doesn’t always bring revenue to the state budget.
“Tax amnesties often hurt tax collection in the long run because they discourage people from paying their future taxes by making them think there will be yet another future amnesty,” IMF resident representative in Ukraine Goesta Ljungman said in an interview with Interfax in March.
“But if there is a tax amnesty, public officials and their close relatives and associates should not be allowed to participate,” Ljungman also said.
The Ukrainian government is hoping to unlock the next tranche of IMF lending as part of their $5 billion agreement, but IMF payments are on hold until a new mission assesses Ukraine’s progress on a number of fronts, including fighting corruption, ensuring the independence of the National Bank of Ukraine, and establishing fiscally sustainable policies.
