#Commentary of Alexander Kostenko on Kiev’s manipulations in tax law

The Ministry of Finance of Ukraine plans to abolish the profit tax and introduce a tax on the withdrawn capital, with mandatory cuts in budget expenditures on the General Prosecutor’s Office and the Security Service. This was stated by Finance Minister Alexander Danilyuk.

Replacement of the profit tax with the tax on the withdrawn capital means that the base of taxation for enterprises will be not profit, but dividends and equivalent incomes, such as royalties and interest. It is assumed that the dividends will be taxed at a rate of 15%, and the payments equal to them – at a rate of 20%. I remind you that now the profit tax in Ukraine is 18%.

Such measures, namely, the abolition of one of the main revenue items of the budget – the profit tax, will lead to significant losses in the state budget. According to estimates of the Ukrainian Ministry of Finance, the losses will be about 30 billion hryvnia (up to 4% of revenues). It should be understood that such a breach will be difficult to cover, taking into account Ukraine’s public debt of 2.1 trillion hryvnia. A deficit of the consolidated balance of payments and reduce the gold and currency reserves of Ukraine is expected.

In addition, the government of Ukraine for 2018-2020 should pay over $16 billion of foreign debts. But where to get money from? The International Monetary Fund will again come to the rescue, which, albeit against imposing a tax on the withdrawn capital without compensation for the losses of the state budget, but following traditions will drive the Kiev government into an even larger debt hole. And, in turn, the population of the country will be imposed even greater taxes on.

However, the IMF has already warned that the hasty adoption by the Ukrainian parliament of a bill on the tax on the withdrawn capital will affect the timing of the revision of the programme of cooperation with Ukraine and the receipt of another tranche, which is unprofitable for Kiev.

According to Alexander Danilyuk, the Ministry of Finance is ready to launch a tax on the withdrawn capital instead of the profit tax if expenses for the Prosecutor General’s Office and the Security Service are cut. But those, in turn, are not ready for discussion and are not going to eliminate economic units.

The idea of replacing taxes is problematic and controversial. The Kiev authorities are doing their best to destroy the Ukrainian economy, which will lead to another round of economic crisis and deterioration of the living standards of the population.

Alexander Kostenko, the DPR People’s Council deputy

Official website of the DPR People’s Council 

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