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Update: Thousands protest over new Ukrainian tax code

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Nov. 22, 2010, 7:02 p.m. | Ukraine — by Reuters

Protesters shout slogans protesting a draft tax law in Kyiv, Ukraine, Monday, Nov. 22, 2010.
© AP

Nov. 22 (Reuters) - Tamara Boikovich buys fruit and vegetables in the Ukrainian port of Odesa and resells them in the capital Kiev to supplement a meagre pension -- but she now fears her old age will be spent dodging the tax man. She was among thousands of small business owners who protested on Monday over a new tax code which the 60-year-old says will condemn her to spending her remaining life "in the shadows".

The protesters, whose numbers were about 4,000 in the morning but later swelled to many more, urged President Viktor Yanukovych to veto the bill, already passed by the parliament. City authorities said protesters numbered 5,000 but a Reuters eyewitness put the figure at easily more than 10,000.

They briefly blocked Kyiv's main downtown street, but were prevented by hastily-erected metal barriers from getting close to the presidential administration building.

"I have worked three shifts at a plant for 40 years and now I get a pension of 700 hryvnias ($87.50) a month, and the government still wants money from me," Boikovich said.

"I will quit this business (if the new tax code takes effect). To hell with it! I will 'move into the shadows'. I will paint walls for the rich and will pay no taxes at all."

Plans to reform the ex-Soviet republic's notoriously weak tax system have triggered the biggest public protests against the Yanukovych government since his election in February, and also revitalised a fractured political opposition.

The new tax code was passed by parliament on Nov. 18, but has to be signed by Yanukovych for it to become law.

The government is under pressure from major creditors like the International Monetary Fund to reform a tax system which ranks third worst in the world after Belarus and Venezuela, according to a World Bank survey.

The new tax code will significantly widen the tax net to take in people like market traders, taxi drivers, cafe owners and hairdressers -- Ukraine's emerging middle class -- who until now have simply made monthly ad hoc payments to district tax officials.

If the code becomes law, they will have to submit details of their operations to the state tax inspectorate, and pay 25 percent of their profits, instead of fixed payments.

Yanukovych said last Friday that the changes meant about 300,000 more people would have to file an annual tax return.


"NO TAX HIKES FOR THE RICH"

But critics say the proposed new code offers a number of loopholes to the government's wealthy industrialist supporters while hitting millions of low-income earners hard.

"This tax code doesn't touch the rich, the oligarchs, at all", said Vitaly, 30, from the industrial city of Kryvy Rih who asked to be identified only by his first name.

He said his family business, which he started in 2001 by selling foodstuffs in a tent to make just over a dollar a day, would no longer be able to expand and would have to be scaled back instead -- if not shut completely.

"We have invested hundreds of thousands of hryvnias, cutting down our spending to a minimum," said Vitaly, who supports a family of four as well as his ageing parents. "I consider myself lucky if I make $1,500-$2,000 a month."

Chanting "Shame! Shame!", thousands massed on Kyiv's Independence Square, hemmed in by police. They urged Yanukovych, who was in Brussels for a summit with the European Union, to use his powers of veto.

Yanukovych said on Monday he was ready to meet the protesters this week but ruled out an overhaul of the tax code.

"I understand their demands very well (but) they will not be satisfied 100 percent," Ukrainian media quoted him as telling a briefing in Brussels.

Prime Minister Mykola Azarov has defended the tax code as "the most liberal in Europe".

The demonstrations coincided with the sixth anniversary of the start of the 2004 street protests against electoral fraud which became known as the Orange Revolution and denied Yanukovych his first chance at power.

Orange Revolution leader Viktor Yushchenko went on to become president in early 2005. But Yanukovych staged a comeback, winning a presidential election last February after a run-off against Yushchenko's erstwhile ally Yulia Tymoshenko.

Kyiv mayor's office said later that a court had banned protests in the city centre for the rest of the week at its request, Ukrainian media reported. It cited visits by Russian Orthodox Patriarch Kirill and Prince Philippe of Belgium as reasons for the ban.
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