Archive for July 15th, 2012


Tax reduction initiative from Ukrainian Tax Authorities

July 15, 2012

Yes, I thought that would get your attention.  Tax reduction initiative from the Ukrainian Tax Authority?

The Ukrainian tax authority has proposed that the 20% VAT tax be reduced to 12% for all types of services in the energy sector, monopoly goods and import operations.

Immediately you have to ask yourself who owns the majority of businesses operating in those sectors and immediately you are drawn to the answer that it is those in government or closely aligned to those in government.

In effect, an 8% tax cut and also an added bonus of far less capital tied up in the terribly slow refunding of VAT from the Ukrainian coffers (where it applies).  A bonus to the government is, aside from giving their vested interests a tax cut, it also means far less VAT to refund and thus less strains on the budget as far as out goings are concerned.

There is also a proposal for 7% tax VAT on “other operations.”  That can and no doubt will be understood as anything that is not related to the energy, import or monopolied markets in Ukraine.   Ergo everybody else.  Jolly good.

Running in parallel to that. the tax authorities also recommend a tax of 2.5% on turnover (yes turnover) dropping to 2% after the first six months (unnecessarily complicated it seems) to apply in conjunction with the removal of  benefits from VAT, personal income tax and tax on profit.  Not necessarily so good.

Blimey!  What about all the lost income?

Well, by cutting or removing these taxes and making the aforementioned changes, the Tax Authority believes it will raise tax revenue by UAH 24.7 billion as it will encourage much of the black economy (which depending upon which guesstimate you want to believe, accounts for between 20% – 50% of the Ukrainian economy), to become white.

We shall see if they are right (should this proposal become reality).  I have my doubts!

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