 |
| PHÎÒÎ: UKRINFORM |
The recently passed law on the budget puts a tall task to fiscal bodies in terms of filling the coffers of the national treasury. Minister of Finance Fedir Yaroshenko told «k:» which legislative initiatives the government will propose to increase budget revenues in the foreseeable future
KW: What sources of financing will cover the real budget deficit?
F.Y.: UAH 19.1 billion of the current 57.7 billion budget deficit will be covered by internal loans, 27.3 billion by foreign loans, 10 billion by proceeds from privatization and 1.3 billion by financing operations with assets (i.e. using residual funds from the previous year, acquisition of securities, etc.). A total of UAH 47.9 billion in T-bills will be issued. External financing of the general fund needs to be covered by the next tranches of World Bank loans for the development policy. The first tranche will be US $500,000 and the second tranche will be US $2 billion and the issuing of T-bills to the tune of US $1.3 billion. The quantity of T-bills issued will depend on the climate on international capital markets at the time of issue. The most favorable terms for attracting foreign loans are when their profit margins are not higher than those of existing instruments.
The most prudent way of mobilizing money is to place UAH 18.3 bn in government securities into the stabilization fund and directing UAH 3.7 bn received from international financial organizations towards financing economic development projects and the budget.
KW: To what degree is the growth of national debt justified?
F.Y.: The ceiling of the national debt is planned at UAH 308.3 bn, which is 28.5% of GDP. Such a level does not pose a threat to the national economy and is within the limit of 60% of GDP set in the budget code.
KW: What policies will the Finance Ministry adopt to increase tax proceeds?
F.Y.: The ministry has already developed the Concept of the Tax System Reform, It has been sent to other ministries and departments and will soon be submitted for consideration by the Cabinet. The Tax Code will be drafted on the basis of this concept.
A flat-rate VAT is envisaged in the draft tax code in compliance with the current legislation. This will allow for preserving one of the main principles of the tax: its neutrality for different sectors of the economy, its influence on forming a competitive environment and the choice of investing in a particular sector.
While EU countries lower the VAT on certain goods and services, mainly on pharmaceuticals, medical equipment and printing of books, Ukrainian companies can be entirely exempt from paying the VAT on similar goods and services. This allows the state to stimulate the development of these sectors. Further, the issue of lowering the VAT and corporate profit taxes will depend on a balanced budget.
KW: Any other novelties in the pipeline?
F.Y.: We plan to pass on the tax burden in the Tax Code from the mobile factors of production, namely labor and capital, to consumption and resource and ecological payments.
The issue is also about optimization of the system of tax breaks, specifically exclusion of highly profitable businesses or incomes that are predominantly passive, in particular in the sphere of foreign economic activity, wholesale trade, leasing out of commercial property and non-residential premises, the sale of works of art and antique collectors’ items, rendering mobile communications services and certain forms of activity that are subject to licensing.
In addition, there are plans to introduce a property tax that will be included on the list of local taxes and duties (compulsory payments).
KW: What will be the rate of property tax in the drafted Tax Code bill?
F.Y.: It is too early to speak of specific tax rates as they have not been coordinated with the work of other members of groups working on the property tax. I can only say for certain that the there is a proposal to charge a tax on real estate based on a progressive scale per square meter of total space. The maximum tax on a property of 500 square meters will be no less than UAH 9-10 per square meter.
KW: What mechanism is suggested to set indirect surcharges on tax obligations?
F.Y.: The indirect method of control over expenses and incomes of taxpayers will be applied to physical persons. It is based on the results of an analysis of received income and expenses of taxpayers uncovered by the tax authorities. From the total expenses of physical persons during the reporting period the amount of income received during this same period will be deducted. If expenses exceed income, the tax authorities will approach taxpayers demanding an explanation and documented confirmation of expenses exceeding the declared income from the assets or other sources of income of a physical person.
If a taxpayer does not provide an explanation and documented confirmation, the taxable income will be increased by the amount that expenses exceeded income.
Indirect methods will be applied only after Ukrainian citizens submit declarations of their income and property status. For companies, they will apply the method of comparing production capacities, raw material resources and production volumes.
KW: At the moment, the government is discussing the possibility of introducing a luxury tax. In what form can this tax be most effective?
F.Y.: First of all, in Ukraine there is no legislation that defines the notion of luxury. For example, in Russia buildings, apartments, country villas and land plots worth more than 2 million rubles (540,000 hryvnia) and private jets, helicopters, yachts and motor boats from 2 million rubles are considered luxury items. In the U.S. such valuables as fur, yachts, private jets and cars cost more than US $40,000 (320,000 hryvnia).
The bill drafted by the Ministry of Finance stipulates that apartments with a square area of 300 square meters and residential and country villas with a square area of more than 500 square meters are considered luxury items. Besides that, a coefficient of 5 on land plots of more than 500 square meters not intended for agricultural purposes that is owned and used by physical persons has been proposed in accordance with the Law “On the Price of Land”. We would also like to raise the excise duty on cars worth more than 50,000 euro and motorcycles with a price tag higher than 10,000 euro and impose a tax of 10% of the value of yachts, private jets and helicopters. The revenues from such a tax would be more than 350 million hrynvia a year.
KW: Is this not a small amount given the huge number of high-class cars and luxury real estate in the country? Is it even worth introducing a new tax that will only bring 30 million hryvnia in revenues per year?
F.Y.: In Ukraine there is a progressive scale of taxing personal income. The more than 10-time difference between the maximum and minimum incomes of citizens creates a certain degree of social inequity in terms of taxes. In world practice, luxury items are taxed with the aim of civilized redistribution of wealth in society.
Printable version
