Taxing talk

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July 5, 2012, 11:11 p.m. | Editorial — by Kyiv Post

Kyiv Post

President Viktor Yanukovych was sounding like a great, forward-thinking democrat in the finest tradition of America’s great president, Franklin Delano Roosevelt.

On the July 2 national day to honor the State Tax Service, Yanukovych rightly equated fair taxation with social justice. Everybody loves money, but not everybody understands how deeply tax policy affects who is wealthy and who is impoverished in society.

Judging from his rhetoric, Yanukovych understands the connection. And if he moves beyond words to actions, this nation’s millions of poor people might get a fighting chance at improving their lot in life.

Yanukovych simply called for using tax policy as an instrument of social justice, and we agree. He called for a progressive income tax system that charges higher rates – up to 20 percent – for the wealthy and lower rates for those with low incomes. And we agree. He also called for a luxury tax, which would be welcome. And, finally, something we’ve been waiting to hear for a long time, the president called for a substantial – not symbolic, as it is now – property tax on real estate. 

“This symbolic tax should turn into a major source for pumping up local budgets and a tool to limit speculation in real estate,” Yanukovych said while addressing tax officers.

Now, property owners can and do sit on buildings, letting them stay vacant for decades, even in the city center. Property taxes would reduce the incentive for these owners to leave these buildings idle.

All of these measures will help Ukraine by ensuring that the needs of society are shouldered disproportionally by those who make – and therefore benefit – the most from the economy. So, we say, right on, Mr. President! Enact these measures into law right away.

But the best way to improve the fairness of taxation, as well as boost government revenue by billions of dollars a year, is for Ukraine to stop tolerating offshore tax havens. Legalized tax avoidance and minimization means that billions of dollars in untaxed profits, from the nation’s wealthiest businesses and people, flees the nation every year to places such as Cyprus.

Yanukovych would need real political courage to combat the vested interests that benefit from such pervasive arrangements. Essentially, he’d have to go against his own private interests – which include offshore companies – and put the nation’s interests first. Then we’d know Ukraine has a truly altruistic leader, not just one who says one thing and does another.

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