Little Code Will Cost 1.2 Billion Hryvnias

Last week the idea of adoption of the so-called little Tax Code acquired more definite outlines. The State Tax Administration drafted a bill On the Introduction of Amendments and Additions to Certain Laws of Ukraine Pending the Introduction of Ukraine’s Tax Code. Presenting this document, STA Deputy Head Oleksiy Shtyria emphasized that in this way separate Tax Code chapters will be introduced gradually. He recalled the demands voiced by the President at the sitting of the Council of the Regions that tax burden be reduced, 2001 budget be developed based on the new tax system, and maintaining tax revenues at the current year’s rates. The introduction of the little Tax Code makes it possible to find a compromise solution.

The bill provides for a number of amendments and additions to the current tax legislation. First, it concerns the VAT, which has produced a paradox. According to Mr. Shtyria, on the one hand VAT nonpayment is growing, soaring to over UAH 6.5 billion, and on the other hand, nonpayment by the state of VAT compensation has grown to UAH 3 billion. In Mr. Shtyria’s opinion, such a democratic method as VAT recompense after three months regardless of whether the taxpayer is working or not was introduced much too early. The bill provides for a more stringent VAT rebate procedure, making it obligatory only if the taxpayer has had a negative VAT balance for six months. The VAT rate for next year has been set at 17%.

Interesting innovations in the taxation of physical persons are expected next year. The bill does not provide for preferential income taxes for citizens according to their professional or sector dependence, and the tax rate will be 25%. In Mr. Shtyria’s opinion, the current level of the tax-exempt minimum wage (UAH 17) does not correspond to its purpose. Since the minimal wage amounts to UAH 118 and the average wage is UAH 188, the tax- exempt minimum, Mr. Shtyria considers, should be UAH 118 (this is understandable: in this case the taxing base will increase many times over).

Adoption of all the proposed amendments to the current tax legislation, Mr. Shtyria believes, will still cause revenues to shrink by UAH 1.2 billion; however, this will make it possble to draw up the budget on the new tax base. As to the big Tax Code, in Mr. Shtyria’s opinion, Parliament could adopt it in November.