national finance

Coalition wants to write off tax debts of financial groups

Coalition wants to write off tax debts of financial groups
Perhaps there is some outside chance that the tax burden for business entities will be alleviated
Photo: Konstantin Melnitskiy

The Verkhovna Rada offers fiscal authorities and business entities evading payment of taxes to conclude a peace treaty. MPs representing the coalition initiated a bill on a tax compromise. The document reads that 95% of all taxes, which companies optimized through shady schemes prior to April 1, 2014 and did not disclose them, will be written off, provided that the remaining 5% is paid. The matter is about profit taxes and the VAT. Within 90 days after adoption of the law, companies will be required to clarify the calculations of tax liabilities. Repentant companies are promised amnesty and a guarantee that the tax and law enforcement authorities will forget about their shady past. Those that have nothing to hide from the fiscal services are not pleased about the innovations and requesting not to hurry with the adoption of the law prior to its finalization.

Attempt #2

The law on tax compromise was supposed to be adopted a few months ago. In June, the previous convocation of the parliament voted for a similar document in the first reading, but it was not adopted in the second reading. For tax evaders the first version was less attractive, because it suggested a 15% payment of the tax debt and less than 30 days for voluntary payment. Earlier, the Ekonomichna Pravda newspaper, referring to its sources, wrote that the head of the Privat Group and Governor of the Dnipropetrovsk Oblast Ihor Kolomoiskiy insisted on the 5% rate. However, there were other “destitutes”.

Experts say that many companies expressed their opinions during debate of provisions of the bill. Some companies managed to sell almost all their goods through tax evasion schemes, says Vice President of the Ukrainian Union of Industrialists and Entrepreneurs (UUIE) Yulia Drohovoz. “Now, such enterprises will have to pay additional taxes not only on their profits, but on their entire turnover. And 10% or 15% is a huge amount for them,” said the expert. A higher rate of tax compromise would suit companies, which minimized their incomes or exceeded the tax credit for VAT. Moreover, Drohovoz explained that 5% and 95% proportions of a tax compromise were applied at one time in Italy. After disclosure of the real incomes of businesses, Italy had the best effect on the budget among all countries that have used such a tool.

It is therefore not surprising that the government supports the notion of a tax compromise, knowing that in the context of the current situation with non-fulfillment of the budget any compensators may prove to be helpful. If the parliament adopts the document later this year, then, according to Chair of the State Fiscal Service (SFS) Ihor Bilous, the budget will receive an additional UAH 2–3 bn in revenues. Moreover, the SFS predicts a failure in collection of profit taxes, which were previously collected in advance payments.

Chain reaction

Those business entities that have no problems with tax bodies do not share the hopes of the Cabinet. “Companies that pay taxes honestly are concerned that when their suppliers or buyers start charging additional taxes and make corrections in declarations the tax authorities could go up the chain and demand them to make payments,” explains Drohovoz.

Earlier, Energoatom made a similar statement, asking the authorities to define guarantees for honest taxpayers more clearly. “According to the algorithm, prescribed in the bill, the company is obligated to provide updated estimates for taxes in prior periods on the same terms with those which evaded taxes. The ultimate outcome is not difficult to guess: the endless faultfinding inspections of fiscal authorities can simply paralyze the company’s financial and economic activities,” said representatives of the press service of Energoatom.

There is a chance that the document on the tax compromise will be adopted by the end of the year, but only as part of the budget package of laws, said head of the parliamentary group Economic Development and one of the authors of the bill on the tax compromise Vitaliy Khomutynnyk. Drohovoz also confirmed the need to vote for this document in conjunction with other bills, because having received a tax compromise, though according to the previous fiscal base, business entities will again be forced to resort to tax evasion.

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