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Prime Minister Mykola Azarov on Sept. 3 orally presented government new proposals for nation's Tax Code. The measures must first be adopted by parliament before they take effect. Ukraine's government proposes imposing a 5 percent tax on income earned by citizens with deposits exceeding UAH 200,000.

Presenting the draft Tax Code in Kyiv on Friday, Prime Minister Mykola Azarov said the measure should be included in the new Tax Code, which has not yet been adopted into law by parliament.

Azarov went on to outline personal income, value-added and property tax proposals in legislation being proposed by government.

Income Tax:

Azarov said personal income of over ten minimum wages (the minimum wage is currently UAH 888, and from December 1 UAH 922) would be taxed at a progressive rate of 17percent, compared to the current flat rate of 15 percent. He said both taxes would cause disputes, but the government would defend its position.

The Ukrainian cabinet in the draft Tax Code has proposed to introduce zero VAT for transactions with scrap metal, grain, industrial crops and timber, stimulating their processing in Ukraine, according to Azarov, noting that consulting and audit firms would not pay VAT.

Value-added Tax (VAT):

Azarov said that VAT rates would be cut.

He said that it is planned to automate the reimbursing of VAT and resume the payment of fines for delays in VAT reimbursement by the state at 120 percent of the discount rate set by the National Bank of Ukraine (NBU, currently 7.75 percent per annum).

Azarov has said the government plans to achieve the adoption of the new Tax Code by the parliament in order to form the 2011 budget using it as a legal base.

"I would insist that all my colleagues, cabinet and [Regions Party] faction members would persistently convince the Verkhovna Rada to urgently consider [the Tax Code] and pass it, and form the budget using a new legal base," he said. "We put forward this tax reform, these very serious risks, understanding that there is no alternative," he said.

Property Tax:

"The government has proposed to impose a tax on properties over 100 square meters in area in cities and towns and over 200 square meters in rural areas," Azarov said. "Over 95 percent of our citizens will not pay this tax, and those 5 percent who have large apartments and large houses will pay UAH 10 per square meter."

Azarov proposed that the new Tax Code take effect before Jan. 1, 2011.