“Hetmantsev and the tax authorities are raising internet prices: get ready for a 30-100% increase” – Glushchenko
30 September 2024 09:31
Oleksandr Glushchenko, a member of the Public Council of the National Council of Ukraine on Television and Radio Broadcasting, has harshly criticised the decision of the tax authorities and the head of the Verkhovna Rada’s Finance Committee, Danylo Hetmantsev, to force Internet providers to switch to the general taxation system. The expert wrote about this on Facebook, according to "Komersant Ukrainian"
“As you know, the State Tax Service has long been mulling over the idea of transferring Internet providers to the general taxation system, but has decided to do so only now. In the summer, the chairman of the Verkhovna Rada’s Finance Committee, Danylo Hetmantsev, made a high-profile statement. He stated that the state loses about UAH 3 billion a year due to the simplified taxation system used by small Internet providers. At the same time, the Tax Service has started sending letters to Internet providers demanding that all providers switch to the general taxation system from 1 October. In case of refusal, they are threatened with cancellation of their registration.
In fact, the ban on Internet providers operating under the simplified taxation system was introduced on 1 January 2022, but, presumably due to the full-scale war, it was not implemented. Thus, the Tax Code does not prohibit companies from KVED 61.10 that provide fixed-line internet services from operating under the simplified taxation system. However, it does prohibit those engaged in the maintenance and operation of networks. On 1 January 2022, the Law on Electronic Communications, adopted in 2020, came into force. According to this law, all companies that provide communication services must simultaneously perform maintenance and operation of networks. This means that these companies cannot operate under the simplified taxation system.
Oleksandr Glushchenko, a member of the Public Council at the National Council of Television and Radio Broadcasting of Ukraine, warns that this decision will be devastating for the industry.
Destruction of small providers in favour of big players
The expert calls these actions of the authorities an attempt to destroy small providers in favour of large market players.
“We are now seeing a show performed by Getmantsev, the State Tax Service and the company, how the Ukrainian telecoms industry is being carved up to fit the big players, under the guise of a holy desire to collect more taxes,” he said,
– he said.
According to Glushchenko, small providers, especially in frontline regions and depressed villages, may disappear completely:
“In depressed villages and frontline areas, providers will disappear as a class. In addition to a decrease in the number of subscribers, higher logistics costs and staff shortages, these providers regularly face shelling and repairs to communication lines. They are in a state of survival. And these are the providers that provide Internet to Ukrainian citizens, the military and special customers. There is no need to talk about depressed villages. These are usually local entrepreneurs who have set up an operator and provide services to several hundred subscribers. They have nowhere to grow physically, economically or technologically,”
– the expert believes.
Glushchenko warns of the emergence of unequal competition conditions in the market. Large players that have long been operating under the general taxation system will be able to dump prices to lure subscribers away from small providers.
“We have a classic ‘pissing off’ of a certain layer of market participants to cannibalise their subscriber base under unequal competition conditions,” he said,
– he says.
Rising prices for the Internet
Changes in taxation will definitely lead to an increase in the cost of Internet services. After all, it is ultimately the consumers of services who pay the increased taxes.
“From 1 October, internet prices will go up. The smaller the market player, the higher the price will be. It’s expensive to administer a common system, especially when you don’t have the money to do so, because a small individual entrepreneur with a hundred or two or three subscribers. Therefore, in order to live “in a new way” and “according to the law”, you need to hire a staff of accountants. And this is money. Get ready for a price increase of 20-30% to 100%,”
– the expert warns.
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Market shadowing
“Small providers will either have to go into the shadows or close down. Either they will have to come up with some kind of gravity and optimise. Or they will have to merge with other players under umbrella brands. Or find something somewhere in the middle… It won’t make the budget any better,”
– Glushchenko predicts.
Increased vulnerability of the industry
Glushchenko points out that the centralisation of the telecoms industry will make it vulnerable to external and internal challenges. Smaller providers would win competition due to the speed of response and quality of service, while large operators may not be able to ensure continuity of communication at the proper level.
Impact on local community budgets
The expert also draws attention to the losses of local budgets.
“Sole proprietorships mean money for the local budget. Hetmantsev and the company are taking the providers’ money away from local communities, and for some of them, this is 5-10% decentralisation))),”
– Glushchenko writes.
Increased corruption risks
Glushchenko also draws attention to the corruption risks associated with the tax system:
“Who said that LLCs cannot optimise? And who said that LLCs pay all taxes? Increased risks of corruption. Blocking tax invoices is a separate sport that prevents businesses from developing and is an effective tool for competition. When your business can simply be stopped. Because they can!”
So, in general, according to Oleksandr Glushchenko, the initiative of Hetmantsev and the tax service threatens both the existence of small and medium-sized businesses in the telecommunications sector and the availability of the Internet for Ukrainians. As a result, small businesses will be pushed out by large corporations, which will create a monopoly and increase the vulnerability of the telecoms industry.
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