Sergiy Tigipko, Ukraine’s deputy prime minister in charge of tax reform, has refuted claims made by an erstwhile ally that he paid employees of his political party in cash – bypassing official declarations and taxes.
Responding to Kyiv Post interview questions, Tigipko was scant on detail, but suggested that the alleged payments at hand were gifts, not shadow, untaxed salaries.
Oleksandra Kuzhel, a veteran politician and government official, made the accusations against her former boss in a newspaper interview on May 15.
“Take for example Mr. Tigipko. I can say that he paid salaries to all of us exclusively in envelopes. As he did, he appeared on the air saying that all salaries must be paid officially,” said Kuzhel, who served as deputy head of his Strong Ukraine party until it merged this year with the pro-presidential Party of Regions.
Implying that the practice is widespread at companies and parties owned by the nation’s billionaire government officials, she was quoted by Delo business daily as adding: “They are all liars.”
Responding to Kyiv Post inquiries on the issue, Tigipko responded in a letter saying: “Regarding the money: I am helping a lot of people – socially needy people, the poor, and simply my friends.”
“I was also helping Oleksandra Kuzhel,” he said.
“But this was not a salary, but help,” he added.
In the written response, Tigipko did not specify how many of those people who worked at now defunct Strong Ukraine party received financial assistance from him and how this sized up with the salaries they may have gotten or not.
Tigipko, who earlier this year merged his party with the pro-presidential Party of Regions, has been one of the government officials most loudly calling upon citizens and businesses to stop paying salaries under the table, in envelopes. Experts say the practice is widespread, adding that an unbalanced tax system keeps about half of the nation’s economy in the shadows.
In her eyebrow raising comments about Tigipko, Kuzhel also criticized government for failing to revamp the nation’s notoriously backward tax rules, saying: “It can’t go on, because it fosters a corrupt market paying salaries.”
Ukraine’s exorbitantly high pension fund tax – about 35 percent and higher – chokes business, encouraging many employers and employees to hide income.
Ukraine’s opposition is talking about a reduction to 20 percent, which would be a good start.
Despite holding a monopoly on political power for two years, President Viktor Yanukovych’s administration has failed to deliver on lowering payroll taxes, which could bring more revenue by encouraging employers to come out of the shadows.
Kyiv Post staff writer Yuriy Onyshkiv can be reached at [email protected]
