As the Occupy Wall Street protests against big capital spread around the world last week, Ukraine’s richest are still sitting pretty.
Demonstrators in New York and European capitals demanded higher taxes for the rich – surely something that Ukrainians, in a country where the gulf between rich and poor is vast, could rally around.
But when about 2,000 trade unionists gathered on Independence Square in Kyiv on Oct. 17, they weren’t campaigning for the wealthiest in society to bear a heavier burden. Instead, they called for higher salaries.
“Our people demanded something real. They perfectly understand that our rich are very different from the rich abroad that for decades were taught by democracy,” said Iryna Bekeshkina, director of the Democratic Initiatives Foundation. “Otherwise the people understood they would gain nothing.”
Despite the financial turmoil of the last few years, Ukraine’s wealthiest aren’t doing badly. Forbes magazine placed eight Ukrainians in its list of U.S. dollar billionaires in 2011, three more than in 2010.
Experts say that the rich’s fortunes are kept safe by their connections with top officials in government and parliament (who sometimes are rich themselves), as they keep taxes on the rich low and often allow their companies to escape large taxes through offshore schemes.
In most European countries the tax system is progressive, taxing the richest much more than the poorest. But not so in Ukraine, where those who earn more than Hr 10,000 per month pay only 2 percent more than everyone else.
“Well-off people and the middle-higher level (top management) of the population didn’t suffer during the economic crisis in 2008,” said Liudmyla Cherenko, an expert at the Institute of Demography and Sociological Research.
The burden of supporting Ukraine’s poorest through the economic troubles was laid on the shoulders of Ukraine’s small and powerless middle class.
“The state took the revenues of the middle class to assure the minimal incomes for the poorest as it [the state] was obliged to guarantee them the minimal social standards,” Cherenko explained.
In most European countries the tax system is progressive, taxing the richest much more than the poorest. But not so in Ukraine, where those who earn more than Hr 10,000 per month pay only 2 percent more than everyone else.
“Taxation in Ukraine does not depend on the financial status of the taxpayer,” said Andriy Servetnyk, partner on tax and legal services at Deloitte, one of the Big Four audit and consulting firms. “The taxation is the same for the middle class and the rich in Ukraine.”
Thanks to the government policy of redistribution the statistical number of poor Ukrainians has for the first time fallen under 25 percent of the total population, while Ukrainians themselves haven’t started feeling more prosperous, experts say.
Meanwhile, according to the state tax service, the number of hryvnia millionaires increased by 8.2 percent in the same period.
Mykhailo Mishchenko, deputy head of sociology service in the Razumkov Center, said the economic crisis caused a fall in the number of people who consider themselves as middle class from around 9.4 percent in February 2008 to 5.8 percent in October 2011.
Mishchenko also said that, according to the sociological survey, conducted by his center the number of people, who consider themselves poor increased by 1 percent, while only the number of the very poorest Ukrainians stayed the same after the crisis at about 13 percent.
The number of the richest people – defined as those who can afford to buy anything they want – stayed at the same level of 0.2 percent, Mishchenko added. He pointed out, however, that this stratum of the population tends to understate their revenues while speaking to sociologists or even refuses to talk to the interviewers.
Kyiv Post staff writer Oksana Grytsenko can be reached at [email protected].
