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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

TAX THE TAX – FRIEND, COMRADE, AND BROTHER New edict does not cut tax rates, only changes VAT collection procedures

13 November, 2012 - 00:00

Ukrainian President Leonid Kuchma signed the edict “On Certain Changes in Taxation Procedures,” stipulating suspension of deductions to the Chornobyl Fund and a 1% reduction of the Social Security Fund fee, as of January 1, 1998, Interfax-Ukraine reports. The suspension is retroactive to the beginning of this year.

According to the presidential press service, these measures will reduce tax pressure by more than Hr 1.65 billion. It is expected that enterprises will be able to use this money for development, including adjustment and production modernization.

This way the situation looks paradoxical. When the Cabinet of Ministers attempts to fill the state budget, President Kuchma cuts more than Hr 500 million in revenues. Does the government not intend to finance measures on the Chornobyl Relief Fund and will cut social payments? No. The decree does not stipulate canceling or any reduction of social payments to the Chornobyl and Social Security funds. Moreover, it underlines that rescue and relief measures will be financed from the state budget. Maybe the government is worried about the heavy taxation pressure the enterprises have to bear?

The decree stipulates amendments to the VAT law. The VAT rate will stay at 20%, but the rebate will be conducted in three months, while acting legislation calls for immediate compensation.

An essential detail: the VAT is real money, not some mythical interest for deductions. Especially as the debts of state-owned enterprises reach to the stars, and private enterprises evade taxes, officially reporting low salaries. Both the government and the President admitted that the mechanism of deductions to the Chornobyl and Social Security funds is not effective. Thus it looks like this decree was promted more by the necessity to find new sources to fill budget coffers than by concern about heavy tax pressure.

 

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