Entrepreneurs want tax concessions
The feedback between business and government officials has been restored. After Ukraine’s Council of Entrepreneurs was disbanded last year, the role of new “ombudsman” of small and medium business in the cabinet has been assumed by the Council of Entrepreneurs and Employers of Ukraine (RPRU) founded in late March 2007. The council includes almost all civic associations that were members of the RPRU’s predecessor. It immediately proceeded to study the draft Tax Code that will set forth practically uniform rules of the game for all businesses for the next several decades. A number of amendments have been suggested for this document, which is very important for the business community.
RPRU officials recently spoke about the possibility of a compromise. Its chairman, Merited Economist of Ukraine Tetiana Zatserkovna, noted that a dialogue is underway and that comments on income and excise taxes have been taken into account. At the same time there are a number of essential “no comment” points.
Zatserkovna identified one of them: the clause about “different VAT refunds for different businesses... In fact, a situation has developed where some exporters are paid VAT refunds at the expense of the VAT being paid, whereas no refunds are issue to investors. It’s a one-sided game.”
Nor are businesspeople overly enthusiastic about the wording of the long-awaited clause on the responsibility for late VAT refunds to taxpayers — not that they see anything treacherous about the intentions of government officials. The reason is simple: the clause is formulated, but there are no mechanisms for accruing fines, guarantees of payment, or sources of financing. Zatserkovna is convinced that this is just another sop for business circles and a dead clause in the code.
The business community has taken an adamant stand with regard to the new procedures for being awarded the title of “Merited VAT Payer.” They are concerned about the long list of inspections being prolonged by the tax collectors’ pre-registration visit, whereupon a business is granted the right to be a VAT payer. It turns out that you have to earn this status. The tax authorities see nothing unusual about the procedures and insist that they must be observed for the benefit of the state, allegedly because this practice will prevent fictitious firms from profiting from VAT refunds. Other than that, the whole thing is supposed to be voluntary.
Another stumbling block is likely to be the updated and simplified taxation procedures. Even a partial compromise (legal entities have been promised a twofold tax rate cut) does not solve the problem because the RPRU proposals, aimed at protecting individual entrepreneurs, have not been taken into account by the authors of the draft code.
Dmytro Vydolob, president of the Jewelers Union, spoke about the prospects for small business in the current circumstances: “For most users it (the simplified taxation system — Ed.) makes no sense at all because there is actually no simplification in this system. Only the name is left.” His thinking stems from a number of clauses in the code. One of them reads that “an entrepreneur whose annual gross income exceeds 300 thousand hryvnias, in addition to his fixed rate (from 20 to 200 hryvnias) must make an additional tax payment to a special account, at the rate of one percent.”
The regulation stating that such individual business entities do not have to install cash registers is nullified. “What does an entrepreneur need this know-how for, considering that it has no effect on his tax obligations?” asks Vydolob. To top it all off, the list of those lucky few exempted from the simplified taxation procedures has been extended.
Businesspeople are also wary of the procedures for adopting the main clauses of the simplified procedures. According to Vydolob, this was done during “a meeting of the working group, without any representatives of small business...We can clearly see that this is a stand taken by big business. Yet small businesses, which form the middle class, will not put up with puny salaries. This is where a real pay increase comes from.”
Ksenia Liapina, MP and honorary chairperson of RPRU, explains that all the problems stem from the fact that the government does not understand the main principle of the simplified taxation system, while “offering only a lesser tax burden.” Small businesses are prepared to pay taxes, but they lack simple accounting and normal administration in order to function normally. Simply put, they need peace and quiet. It will be some time before government officials and businesspeople end their verbal battles, and time is money.
