TAX REFORMTAX REFORM::

CONCEPT THAT UNITES CONCEPT THAT UNITES SOCIETYSOCIETY

Budgetary and tax aspectsBudgetary and tax aspects

Introduction

Concept designed by the coalition of authors – presenters of tax reform concepts at the Open Communication platform of National Reform Council

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AIMAIM

Creation of favorable tax conditions for competitiveness

and sustainable growth of Ukraine’s economy

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Key issues of tax legislationKey issues of tax legislation

–High tax burden– rampant discretion– intricacy, vagueness, lack of logic – Frequent changes in tax legislation

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Problems to be solved with this Problems to be solved with this ConceptConcept

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Task #1Task #1::

• Stipulate in Constitution:Redistribution through public finance should

not exceed 35% of GDP

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Task #2Task #2 Minimise corruption

1. Introduction of Tax payers e-office as of January 1, 2016

2. Abolition of penalty plans for tax violations.3. Accountability of public servants for illegal

claims and damage compensation.4. Improving norms of responsibility for tax fraud.5. Tax police liquidation and separation of

competences of collecting taxes and tax fraud investigation.

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Task #3Task #3: :

Decrease tax pressure

1. Budget spending reduction according to economic situation.

2. Salary tax cut down (personal income tax and mandatory social contribution) from 55-65% to 20%*.

3. Social insurance reform, Social insurance fund liquidation, State social guarantee introduction.

4. Transition to taxation of distributed profit with 15% rate.

5. Introduction of single account for all state taxes (except VAT).

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* It is impossible to attract investors by a high level of social security. Experience of Georgia and many other countries proves that decrease of rates is covered by de-shadowing. Compensators are presented on the slide “A new budget model.”

Task #4Task #4: : Restore trust between business and the StateRestore trust between business and the State

1. Suspension of strict fiscal policy and implementation of a liberal tax reform.

2. Imposition of a moratorium on any changes in the tax law which negatively impact the business climate.

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* Implementation of fiscal procedures in 2014 – 2015 led to mass migration of business out of Ukraine, shut-down of businesses, and economic downturn. It is impossible to attract investors by fiscal policy. Business is looking forward to a liberal tax reform aimed at the development of entrepreneurship and economic growth.

Task #5Task #5: :

Facilitate entrepreneurship development in the Facilitate entrepreneurship development in the societysociety

1. To keep simplified system of taxation and reporting.

2. After reform of general tax system, changes to simplified system of taxation might be discussed.

3. Improvement of digital tax administration. Effective department of finance investigation.

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Task #6Task #6: :

Increase budget revenues through economic Increase budget revenues through economic growthgrowth

1. Stimulation of investments through taxation of distributed profit.

2. Reducing pressure on the salaries and, as a result, its legalization and increase of actual demand.

3. Reducing administrative and corruptive pressure on business through liquidating discretion in the process of tax administration.

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Tax administrationTax administration• Ban on instituting criminal proceedings before tax

liabilities are agreed upon and the agreed tax dues are paid to the budget. Cutting down on the number of primary documents and the time spent for tax reporting.

• Liberalization of the system of punitive sanctions in the process of additional tax assessment and for the violation of cash discipline.

• Ensuring openness of the State Fiscal Service of Ukraine through publishing the executive summary on the activity of the service and the taxpayers.

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ConceptConcept

Indicator The plan

VAT20%

(automatic compensation, digital office, separated account in Treasure)

Income taxReplaced with tax on distributed income 15-20%, tax on

dividends 0%Income tax for individualsSingle social contribution

Income tax for individuals: 20%Single social contribution: 0% (not paid)

Budget Cancel «support» to business, fight misappropriation, revision of pension fund, electronic public procurement

Social insurance fund Abolishing of temporary disability funds, and accident at work. 12 days of sick leave for company’s cost, medical insurance

Electronic administration of VAT Electronic administration

Capital assets of enterprises (property, real estate) Property tax without privilege

Resources, excise duty Increase already happened13

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Budget income

• Performed research on 2013 data, as well as 2014-2015 data, show that the suggested Concept increases income to the budget by 7 billion UAH ( 2013 prices) in a pessimistic scenario

New budget modelNew budget modelIndicator Expected change Income

Income tax Replaced with tax on distributed income 15% - 40 bln UAH

Personal income tax Single social contribution

PIT: 20%Single social contribution: 0% (not paid) - 100 bln UAH

Additional PIT due to increase in salaries

Except state owned enterprises + 20 bln UAH

Budget savingsCancel «support» to business, fight misappropriation,

revision of pension fund, electronic public procurement

+ 30 bln UAH

Social insurance fundsAbolishing of temporary disability funds, and accident

at work. 12 days of sick leave for company’s cost, medical insurance

+ 15 bln UAH

VATE-governance,

automatic compensation, digital office, separated account in Treasure

+ 30 bln UAH

Real estate, property Property tax + 2 bln UAH

Capital assets of enterprises Property tax without privilege (1-2% of the cost) + 30 bln UAH

Resources, excise duty Increase already happened + 20 bln UAH

Budget profit + 7 bln UAH. 15

Authors coalition

• Authors of the concept “A Common-Sense Tax System”

• Reanimation Package of Reforms civil initiative

• Nova Kraina (New Country) civil platform

• Ukrainian association of certified accountants and auditors

• Entrepreneurs for Reforms group• Authors from the National University of

State Tax Service of Ukraine• Authors from the Nezalezhnyi Audytor

(Independent Auditor) journal• Author’s concept

(Danylo Monin)

(to be continued)

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Thank you for attention!

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