The government plans to raise VAT and military duty, but does not want to change the tax sphere, experts say
23 May 2024 18:27
EXCLUSIVE
The Cabinet of Ministers of Ukraine plans to increase the value added tax and military duty, Forbes reports. The government is preparing a draft law.
According to the publication, the military tax is to be raised from 1.5% to 5%, with a similar rate for individual entrepreneurs.
Another measure is to raise the value added tax by 2-3% (currently, the VAT is 20%).
In this way, the government will try to find funding for military expenditures, including those related to mobilisation.
Economic expert Oleh Hetman notes that raising VAT really looks like the “least evil” in the current situation, as it is an indirect tax.
“The country, defence and the frontline need additional resources. The estimates that have been made are 200-300 billion hryvnias extra for this year. These are quite realistic estimates. In principle, if there were no other ways to get these funds, raising VAT as the least harmful indirect tax and raising the military fee would be objective and realistic options. VAT is an indirect tax, and it is less harmful to the economy than direct taxes. 1-2% is an additional 100 billion, which would be quite painless,”
– the expert commented.
In his opinion, the military tax is equivalent to direct taxes, and therefore its increase should be considered only in extreme cases. If it is introduced, it will be quite noticeable for citizens, especially for individual entrepreneurs.
“Raising the military tax is more harmful than raising VAT. Especially for individual entrepreneurs, who currently pay 5% of their turnover and will pay 10% of their turnover, which is quite high. Therefore, raising the military tax could be a realistic step for super-extreme cases,”
– hetman believes.
However, the expert stresses that the government is looking for money in the wrong place. Hundreds of billions of hryvnias are hidden in the most common tax schemes and it is these that need to be addressed.
“For example, counterfeiting. These are excisable products that are sold [illegally] due to the inability of tax and law enforcement agencies. And this is a budget loss of UAH 40 billion a year. Grey imports are even bigger losses, ranging from UAH 120 to 150 billion in net losses per year. Black salaries in envelopes, to which individual entrepreneurs have nothing to do, are budget losses of UAH 110 to 120 billion. That adds up to 300 billion,”
– the economist emphasised.
At the same time, the government is still not ready to make the really necessary changes to the tax system.
“For some reason, the Cabinet of Ministers and the Parliament are not ready to take the necessary measures. We need to completely reboot the tax authorities, customs and the BES with the decisive voice of international experts so that they start working properly, raise salaries for employees, and recertify all personnel – that’s what needs to be done. These three bills have been in the parliament for a year, and no one has even mentioned them. Instead, we are offered to raise taxes again,”
– oleg Getman summed up.
