Tax consensus

To a certain extent Jan. 22 may be called “tax day,” when the State Tax Administration of Ukraine (DPAU) decided to remind citizens about the start of the campaign to declare income for 2006 (Jan. 1-April 1). This year’s reminder is not needless caution because many people will have to pay taxes on types of activity that were not taxed in the recent past. These include income received from non-residents (also called foreign income), income from operations with investment assets (sale of securities, corporate rights, etc.), non-targeted charitable aid from a benefactor, and income from rent to natural persons, and winnings.

What will the country gain from this campaign? For one thing, we will find out how many more millionaires, and even billionaires, are in our country and where they live. According to the year-end results of 2005, there are 2,600 more millionaires and only three more billionaires. We will also be able to see whether the middle class has grown, although financial boundaries are generally indistinct and everyone who wants is accepted. Theoretically, if one excludes middle-rank managers, then doctors, teachers, and average engineers should be part of this socially-important stratum whose growth guarantees its increasing stability. However, in most cases these first three categories alone do not reach this golden mean and remain very close to the poorest strata.

Why is this? Again, the problem here is the tax system for which our legislators cannot find a common language. However, it looks as if things are shifting. Proof of this is that a couple of members of the Our Ukraine fraction, Serhii Bychkov and Volodymyr Stretovych, have developed and registered a draft law in parliament, aimed at improving the mechanisms of the work of the special economic zones (SEZ) and territories for priority-driven development (TPR).

The draft law entails the creation of a regime of special preferential duties in TPRs, SEZs, and tourist-recreational zones. This regime will define the specific features of the calculation and payment of enterprise income, VAT, incoming customs tariffs, land payments, and certain local taxes and fees by subjects of these territories. The authors of the draft law think the bill will help attract foreign investments, activate enterprise activity for boosting export growth, create jobs, and also ensure the effective use of resorts’ natural healing resources.

In principle, there would not have been any hoopla around this draft law if Ukraine had not abolished all the preferences for SEZs and TPDs without distinction. Even after it became clear that this was a mistake, its initiators were in no hurry to rectify the situation, which put the country in a very bad light where investors are concerned. The opposition and the Presidential Secretariat were so strongly opposed to the SEZs that the government had to exclude the corresponding points from the budget law and accompanying economic laws.

Bychkov and Stretovych’s draft law, which is not simply a half-way step toward the government and foreign investments but also toward common sense, is even more remarkable. But does this mean that Ukraine is finally approaching a consensus on tax questions, without which our parliamentarians are not able to develop this sphere up to world standards?

Replying to this question, Bychkov, who heads the Association of Ukrainian Taxpayers, told The Day: “To develop a consolidated position on tax questions, the experts working in parliament, regardless of their political preferences, need to systemically eliminate the many ‘white spots’ left in the taxation legislation.” He thinks that the adoption of a Tax Code is actually the consolidation of all tax questions. However, in the nearest future, separate bills should be introduced in order to achieve an immediate result. In his opinion, these will be steps toward the Tax Code, which will unquestionably create a base for the stable work of the entire tax system. However, it is a thankless business to make predictions, Bychkov thinks, as talks on adopting a Tax Code have been going on for six years.