Using a strategy based on beautiful ideas can harm your business.
The Government of Ukraine, at the request of the International Monetary Fund (IMF), approved the “National Revenue Strategy” , which is designed to prepare the country for existence without the financial support of our allies. Despite statements by the authorities, the document was prepared without discussion with business and the public. This is not surprising, since the strategy contains a number of measures that are unlikely to receive widespread support from citizens. “Apostrophe” looked into what the national income strategy envisages, what its pros and cons are.
Tax gift “under the Christmas tree”
The Cabinet of Ministers approved the “National Revenue Strategy” for 2024-2030. The document was adopted on New Year's Eve, December 27.
The main objective of the strategy is to determine approaches to increasing Ukraine’s sources of income in order to do without the help of foreign partners in the future. In addition, the adoption of the “National Revenue Strategy” is one of the IMF’s requirements for further financing of our country.
The Ministry of Finance, which was the main developer of the strategy, said that its preparation took place with the active participation of business. However, judging by what representatives of the same business say about the strategy, there was in fact no real discussion.
Moreover, the government kept the details of the national revenue strategy secret, and they became known only after it was published on the official website of the Cabinet of Ministers.
The document contains almost 150 pages, but if you evaluate it very briefly, it talks about increasing taxes, abolishing benefits, again, primarily tax ones, and strengthening control over the income and expenses of citizens. But if you look at the strategy in more detail, you should start with the fact that it involves significant reform of the country’s tax system itself. In particular, we are talking about optimization, that is, reducing the number of employees of the State Tax Service (STS).
In addition, it is planned to introduce risk-oriented approaches to the work of the tax office, which will include a transition to automation of tax risk management.
Automation with the widespread use of IT tools, in principle, should become an important element of the work of the State Tax Service. It is also expected that depersonalization of taxpayer data will be introduced, which is intended to reduce corruption - after all, tax officials, at least theoretically, will not know who is behind this or that number in the register.
At the same time, depersonalization of taxpayer data should be the first step towards providing tax access to banking information , including data on the movement of funds in accounts.
Changes must also occur at customs. The main innovation here is that the authorities of the State Customs Service will receive the right to conduct operational investigative activities .
At customs, as well as at the tax office, it is also planned to introduce automation and IT solutions.
More high and different taxes
As for the taxes themselves, we are talking about their harmonization with the rules that apply in the European Union. Thus, it is planned to increase excise taxes on fuel, alcoholic beverages, and tobacco products to the minimum EU rates. The introduction of an excise tax on sugary drinks is also likely.
In addition, carbon tax
European standards will also be introduced in real estate . If today the taxation of real estate takes into account its area, then in the future the tax base will be the estimated value of the property.
At the same time, it is planned to cancel a number of preferential tax regimes . In particular, this will affect VAT, but we will also talk about other regimes, for example, “Diya.City”, which was developed specifically for IT companies and promoted by the current government.
An important innovation of the “National Income Strategy” is the introduction, or, more precisely, the return of a progressive scale of taxation of personal income. Currently, Ukraine has a single personal income tax rate (NDFL) of 18%. It is planned that there will subsequently be one or more tax rates that will apply to larger incomes. However, so far neither the amount of such income nor the rates themselves have been announced.
Now is the time to remind you that the tax office will have access to information about the movement of funds in the bank accounts of Ukrainians. This is important because the strategy assumes that all income of individuals received outside of business activities will be taxed at the general personal income tax rate, which today is 18%. This potentially means that all transfers to bank cards are subject to taxation.
But that's not all. The National Revenue Strategy involves significant reform of the simplified tax system.
Thus, for legal entities that use it, the tax rate will be gradually increased to 18%, as a result of which they will switch to the general taxation system.
For individual entrepreneurs (PE), an increase in taxes is provided with the introduction of differentiated rates - from 3% to 17% - depending on the type of activity (we are talking about sole proprietors of the second and third groups, which will be merged into one). They will also be required to use settlement transaction registrars (SRT).
For the first group of “simplified” people, the number of types of activities will be narrowed, and the fixed tax will be changed to a tax on actual income.
Individual entrepreneurs belonging to the fourth group will receive increased taxes with an expansion of the tax base.
There are more negatives than positives
Not only for business, but also for most specialists, the provisions of the “National Income Strategy” became a kind of Christmas and New Year’s surprise, and a rather unpleasant one at that. Therefore, their reaction to these provisions is appropriate.
“After reading the National Income Strategy, I want only one thing - that the Ukrainian people in any way do not allow the authors of this rubbish to put into practice their painful and unprofessional ideas ,” Deloitte partner Andrey Servetnik wrote on Facebook.
According to him, the state does not have its own income, since it operates with taxpayers' money.
“And in order for them, payers, to give more to the state treasury, they need to be given the opportunity to earn more. That is, to get more income to share for public needs - primarily defense, courts, security and diplomacy, ” Servetnik notes. “ Before writing a “strategy” for taking money from citizens, it would be worth conducting a fair assessment of spending needs (with the exception of defense) .
Valeriy Pekar, a teacher at the Kiev-Mohyla Business School and public figure, also criticized the strategy.
“Briefly about the National Revenue Strategy.” We will milk the cow twice as much and she will produce twice as much milk. It won’t work,” he wrote briefly on Facebook.
To be fair, there are some positive aspects to the National Revenue Strategy.
“The strategy contains a number of useful points: improving the work of the tax and customs services, risk orientation, establishing performance indicators and market salaries for employees, transferring tax and customs databases to an independent data center and many other useful things ,” he said in a comment to Apostrophe » coordinator of expert groups of the Economic Expert Platform Oleg Getman.
The head of the expert and analytical council of the Ukrainian Analytical Center, Boris Kushniruk, also sees some positive aspects in the strategy.
“It contains a significant number of completely correct measures, the feasibility of which has been discussed for a long time, ” Kushniruk told Apostrophe. - But along with them there are a number of others that are quite doubtful. For example, it is proposed to bring excise taxes on tobacco to European levels in the near future. In conditions where the income level of Ukrainians is significantly lower than in the EU, this will only provoke an even higher “shadowization” of this market .
And, of course, experts are dissatisfied with the innovations that relate to the simplified taxation system.
“We do not see the advisability of significantly increasing tax rates for this group of entrepreneurs or reducing the number of entities working on this system ,” says Oleg Getman.
According to Boris Kushniruk, before introducing measures aimed at increasing taxes and limiting the use of the simplified system, it is necessary to significantly improve the system for collecting VAT, personal income tax and the single social contribution (USC).
“If this system is built well, then simplified taxation will lose its meaning, and it can really be abandoned, ” says the expert. “ However, it is not clear from the strategy whether such legislative changes are planned .
From theory to practice there is more than one step
In defense of the national strategy, it should be said that most of the above provisions are planned to be introduced gradually, and this process, accordingly, should be extended over time. In particular, reforms regarding individual entrepreneurs will be implemented in three to five years.
In general, innovations should begin no earlier than the completion of the reform of the tax service itself, and only after “the restoration of taxpayers’ trust in the tax authorities.”
Although the latter is somehow hard to believe, considering that for more than 30 years of independence there has been no trust in the tax authorities. Therefore, it is very doubtful that it will appear within just a few years.
“If we manage to reboot customs and taxation in the way that think tanks and members of the parliamentary tax committee propose (with the appointment of management with the participation of foreign experts, re-certification of all employees, the creation of virtue commissions, the appointment of market salaries, and so on), then in a few years this will lead to a dramatic improvement in the functioning of these bodies, ” says Oleg Getman. “ And only after this will it be possible to talk about the level of trust in them, which will allow us to raise the issue of granting these bodies additional powers .
For now, these are all general words.
“It’s unlikely that we should take the plans voiced in this strategy too seriously. They are designed for the period until 2030, and during this time a lot of things will change in Ukraine, including the government,” says Boris Kushniruk.
In addition, the announced strategy is only a concept, the implementation of which will require a whole bunch of separate bills.
“Of course, the expert community will carefully monitor the development of these bills. And he will also prepare his proposals in order to reject inappropriate norms, leaving those that will contribute to economic development ,” concluded Oleg Getman.
