VR Tax Committee demands that the Ministry of Finance revise the bill on tax amendments

Photo: PHL

The Verkhovna Rada Committee for Tax and Customs Policy has criticized the bill on the changes to the Tax Code, which was drafted by the Ministry of Finance. The other day the deputies sent to the ministry 43 remarks to the document, the committee’s chair Roman Nasyrov (Petro Poroshenko Bloc) informed yesterday. In fact, there were questions to nearly all clauses of the reform from the intention to introduce a tax for residential property to the progressive scale of taxation of personal income.

Yesterday, none of the members of the Tax Committee spoke in favor of the package of the tax initiatives of the Ministry of Finance. A conclusion was drawn that the draft of the amendments to the Tax Code does not correspond to the norms envisaged in the coalition agreement. Seeing as none of the representatives of the ministry attended the meeting, their opinion could not be heard.

The State Fiscal Service, however, sent Director of Taxation Methodology Department Nelya Pryvalova to the meeting with the people’s deputies. However, during the discussion of the draft she was not given the opportunity to speak.

The proposal of the government to reduce the number of taxes from 22 to 9 is nothing but a declaration that does not contain any economic substantiation, says member of the Tax Committee Oleksandr Dolzhenkov (Opposition Bloc). He believes that the draft lacks more essential things, for instance, the possibility to take into account overpaid amounts of VAT as payment of other taxes. Dolzhenkov believes that the institute of advance payments of the profit tax must be excluded from the draft proposed by the Ministry of Finance as such. “This is a rudiment of the previous tax system. Besides that, no other tax system in the world contains such a notion,” the parliamentarian stressed.

The government believes that those who earn more must pay more. However, the people’s deputies believe that higher rates of personal income tax for citizens who earn more than 10 minimum wages will not lead to a substantial increase in proceeds to the national budget. Meanwhile, this will create pressure on those who pay and earn a high official wage. “Such wages account for 5% of the payroll, which is upwards UAH 400 bn. This means that UAH 20 bn account for the wages that are higher than 10 minimum wages,” calculated Dolzhenkov.

The committee also found many redundancies in the proposals of the Ministry of Finance. In particular, the committee believes that the provisions with formulations about debt collection should be removed from the document, believes Deputy Chair of the Tax Committee Mykola Frolov (PPB). “Any discussion between a taxpayer and a fiscal body must take place in court. Out-of-court debt collection will lead to a new wave of corruption,” the deputy assured.

There were also questions to the ministry’s initiative not to tie the expenses of companies for goods and services paid to entrepreneurs paying a flat rate tax to gross expenses. “If somebody pays a businessman operating on a flat rate tax, it is equalized to offshore companies and in that case the expenses of those who paid increase by 30% of the amount of such expenses. This puts an end to all other improvements in the flat rate tax. If this payment is intended to lower tax rates, then it is better to not lower them,” assures Oleksandr Kirsh (People’s Front).

Introduction of the system of electronic administration of the VAT, which should be put into effect in January, is another bone of contention between the fiscal bodies and the parliamentary committee. Yesterday, a decision was made by the committee to recommend that the parliament adopt the draft law canceling this system in general. Meanwhile, the representatives of the Ministry of Finance earlier agreed to postpone the introduction of the system until April in an attempt to find a compromise with businesses and the parliamentary coalition.

The ministry is preparing to present the draft changes to the Tax Code and Budget Code in the VR on Friday, informed Deputy Minister of Finance Ihor Umanskiy. He did not specify whether the remarks of the deputies will be taken into account. In any case, there is not much time left for the approval of the amendments, seeing as the Cabinet must introduce to the parliament the draft of the national budget for 2015 based on these documents.