New tax code proposal submitted to Parliament by administration (05/14/00)

New tax code proposal submitted to Parliament by administration

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Continuing government efforts to move economic reforms speedily forward, the State Tax Administration of Ukraine on May 4 submitted a new tax code to the Parliament for approval, which it hopes will bring some of the Ukrainian economy out of the shadows.

The tax administration hopes that the bill will be the first step in the formation of a tax system with high collection rates, in which the responsibilities of private individuals and legal entities are clearly spelled out.

It would reduce the number of taxes from 35 to about 25 and would reduce individual income tax to a ceiling of 30 percent from its current 40 percent.

"We are beginning systematic steps to raise the influence of taxes on the national budget," said Prime Minister Viktor Yuschenko as he presented the draft bill at a press conference. "We expect that the nation gradually will begin to change its attitude towards taxation."

Ukraine's complicated and vague system of taxation is one of the reasons that at least 40 percent of its economy money badly needed by a cash starved government - remains in the shadows. The confusing laws also have scared off potential international investors.

The government has come under increasing pressure to streamline and revamp its tax system from international financial organizations such as the International Monetary Fund and the World Bank, which have loaned Ukraine billions of dollars to keep its economy afloat.

A press release issued by the State Tax Administration emphasized that Ukraine is moving to meet European standards with the new tax system.

"The upgrade of the tax laws foreseen by this draft law is aimed at Ukraine's further integration into the world community and the adaptation of Ukraine's tax legislation to that of the European Union," read the statement.

The draft bill, which is a compilation of five separate tax proposals into a single document, is expected to contribute an additional 1.12 billion hrv ($216 million) to the annual budgets of both the central government and municipalities. The goal is to eventually collect taxes on about 30 percent of the country's gross domestic product.

Individual income taxes will be streamlined from five separate brackets ranging from 10 to 40 percent to three: 10, 20 and 30 percent. The new ceiling now will match the current rate that businesses are required to pay.

The government expects the simplified tax structures to increase income tax payments by 291.1 million hrv annually. Changes in property taxes, specifically on houses and buildings, should contribute another 331 million hrv annually.

The draft bill also announces changes in custom duties and excise taxes, but maintains the current value added tax on exports.

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