Ukraine’s President Petro Poroshenko, representatives of the European Business Association (EBA), the American Chamber of Commerce and the Union of Ukrainian Entrepreneurs discussed on Dec.1 the replacement of the profit tax with the tax on withdrawn assets and said he is ready to submit a relevant bill to the Verkhovna Rada this year.
“The discussion on whether such reform is needed is over and done with. There is political will to introduce and adopt [the relevant bill],” the president said causing applause.
At the same time, during the discussion, EBA Executive Director Anna Derevyanko noted the lack of consensus among the business community on this matter. The transfer of losses, taxation of interest on payments to non-residents, and expansion of the powers of the State Fiscal Service cause particular concern.
As a compromise, she proposed leaving the profit tax in place, but adding to it the possibility of tax differences – not to impose tax on a profit which is reinvested.
In response, Poroshenko said that the taxation of interest is part of streamlining the taxes, so that the losses should not become a problem, and the introduction of the tax on withdrawn assets will give a powerful incentive for investment into small and medium-sized businesses, and will result in a surge in the country’s economic growth.
Some concerns were voiced by Ukrainian Finance Minister Oleksandr Danyliuk, who in his presentation pointed to the lack of a single point of view of the international expert community following the attempts of similar reforms in other countries.
He also estimated the budget losses in the range of Hr 25 to 40 billion, whereas earlier the president spoke about Hr 20 to 23 billion, but no more than Hr 30 billion.
The finance minister noted that Poroshenko’s initiative on the introduction of such a tax from Jan. 1, 2019 gives time to find answers to the concerns of skeptics.
In his opinion, among the priorities of such preparatory work is the reduction of budget expenditures and the reform of the State Fiscal Service in order to strengthen its institutional capacity in administration of taxes.
Danyliuk also said the finance minister of Latvia, which will introduce a similar tax on Jan. 1, 2018, is scheduled to visit Ukraine early next year.
