Kyiv: The level of the Ukrainian economy will grow only after the creation of a favorable business climate. That is why the state should stop seeing in business crime, adopt a liberal tax code and give enterprises opportunities for development – under such conditions, foreign investors will come to Ukraine. They are not afraid of the war in the east of the country, they are afraid of non-transparent tax legislation. The President of the Association of Taxpayers of Ukraine and former Ambassador Extraordinary and Plenipotentiary of Georgia to Ukraine Grigol Katamadze said in exclusive interview for Front News.
Front News: When can a draft tax code developed by the Association of Taxpayers be accepted in Ukraine?
Grigol Katamadze: Changes in recent years do not give the desired effect that business, society and the state expect. Therefore, over the past year, we have agreed with the Ukrainian business a draft of a new tax code. In the beginning of the summer we transferred it to the Cabinet of Ministers, factions, and profile committees. We hope that the joint effort of the business community and parliament in the first half of next year will adopt a system document called the liberal tax code.
FNI: What changes in the tax law offer an updated draft code?
GK: The main thing that we propose is to leave nine taxes from the existing thirteen: five nation-wide and four local. First, it will be done in advance, six months before the start of the new fiscal year. One of the main parts of our code is the change in the tax on the withdrawn capital. Now it is considered as a separate bill, which has already been agreed with the Cabinet of Ministers of Ukraine and is an integral part of our code. But the Cabinet did not submit it to the Verkhovna Rada for consideration, but sent it to the Council of Reforms. Unfortunately, the time is wasted. Therefore, I’m not sure that the parliament will have time to adopt this bill this year.
We propose to combine two taxes in one tax: a single social contribution and a personal income tax. Today it is about 41% in general. We suggest leaving it with acceptance. But along with the adoption and entry into force of the liberal tax code, set the tax at 32%, and every year – reduce. For example, if the code is adopted and it came into effect in 2019, this combined tax will be at the level of 32%, and in a year in 2020 it will be at the level of 28%, in the third year – 20%.
FNI: Will the simplified taxation system be abolished?
GK: Today there is a lot of discussion about the fact that we are destroying a simplified system. But we are convinced that today a big business is abusing the simplified system, it is necessary to stop it. Many years ago, when the state in the late 90’s was not able to give jobs, the parliament thought and passed the law “On a simplified taxation system.” Remember how many small businesses appeared. But then there were inventive people who started to abuse it. If you go to a large market, you will see that this is a big business. In fact, you will learn that this is an emergency. This must be completed.
We offer a new approach to microbusiness. For example, the first category of microbusiness with an annual income of 2 million, will pay a fixed tax of 500 hryvnia per month, they will not be enforced by rrolls and do not cling to them. We are convinced that in three years we will have from this business more than 5 million. A lot of money will come to the budget.
FNI: What changes are proposed by the new code in the field of declaring individuals?
GK: Together with the entry into force of the draft of the new liberal code, a one-time voluntary declaration of personal income will be announced for 6 months. It means that every citizen will record his entire state without paying a tax. Then it will be necessary to control who fixed one, and spends – absolutely other means.
FNI: How much can the tax legislation change to improve the situation in Ukraine’s economy?
GK: We hear from our European colleagues that low taxes and a transparent tax code will lead to a high level of economy. If there are high taxes, accordingly, there will be a low level of the economy. Opponents will say that there are high taxes in Poland or Germany. But this is the situation today, when these countries have risen from their knees and have a successful business. When is the fate of the gross domestic product in Poland – 67%, in the UK – 97%, and in Ukraine – 10%, what are we talking about?! I am convinced that liberalization (tax legislation – FNI) will provide a strong impetus for the development of the Ukrainian economy. Then after three years of a moratorium on changes in tax laws, we will return, and perhaps the need for higher taxes.
FNI: Has international experience been taken into account when developing a liberal tax code?
GK: The experience of successful countries shows that when they had problems first they conducted deregulation. This reduction in taxes, a reduction in the number of rates, is the liberalization of tax legislation. Only then did they become successful countries. All the rest that we did was the experience of our specialists … By the way, when we were working on the draft of the liberal code, I told my colleagues – there is no need to copy either the Georgian, Polish, Singaporean or existing tax code. The existing tax code of Ukraine is a big brake on business development. Moreover, it is a trap for business. We worked on drafting the code in this way, becoming a producer, agrarian, small and large business.
FNI: How active are foreign investors in Ukraine?
GK: I want to emphasize at once that potential foreign investors are not afraid of the war in the east of Ukraine, but are afraid about the opaque tax system and corruption. There is a state statistics, which indicates that in recent times investments have been made in Ukraine. But this is a local investment.
Ukraine needs a large and global investor, big money. Moreover, I am convinced that the main investor for the Ukrainian economy is the Ukrainian investor. I mean, the Ukrainian business. I am grateful to the former Prime Minister of Lithuania for his efforts at the fact that he is now doing the so-called “Marshall Plan” for Ukraine. We need to give an opportunity to develop Ukrainian business, because there is a lot of money inside the country.
FNI: Investors from which countries are most actively cooperating with Ukraine?
GK: At today’s forum – a very interesting investment panel. We invited the representatives of Georgia to tell them, the business climate is this country, why Georgia today became one of the top ten countries in the Doing Business ranking. Secondly, our Georgian colleagues also heard about the opportunities that are in Ukraine for investment. That’s why we had a startup alley. I understand that this is a very small example. 10 small startups – not an indicator for Ukraine. It is important that Ukraine has many successful start-ups, including those that are not yet known. Wherever you go, in every city and village of Ukraine you can find talented people who need help. How they can be helped, the state must decide.
FNI: Can Ukraine learn from the successful experience of doing business in Georgia?
GK: When we give examples of Georgia, Estonia or Slovakia, many officials do not understand this and are almost offended. They say that big changes are possible only in small countries. I do not agree with this. By the way, even though Georgia is a small country, but in a very short time Georgia make fundamental changes there, it was much more difficult than in Ukraine. I think that it is not necessary to adopt the experience of other countries. You just need to do it. Why are we talking about a liberal code? Why do we say that the state should take the first step? The fact is that on the one hand is the state, and on the other – business. The state sees in business crime and enemies, comesto entrepreneurs with “mask-show” … This must be completed. Business can not be an enemy in its own country. It is necessary to look at entrepreneurs as patriots who will be able to raise this country. It is possible, they only need to provide such opportunities. This means not just “give money,” but to accept such conditions for doing business so that it can develop.
On Wednesday, November 15, Grigol Katamadze said that the Association of Taxpayers of Ukraine is waiting for the adoption of a new tax code in the first half of 2018. Secretary General of the European Taxpayers Association Mike Eger in a comment to Front News International said that the adoption of a new tax code is very important for the development of the Ukrainian economy. According to him, the proposed reform is a step forward to simplify the system of paying taxes, ease the creation of business in Ukraine and stop the pressure on small and medium-sized businesses. June 27, the Association of Taxpayers of Ukraine in Kyiv today signed a memorandum of cooperation with the European Association of Taxpayers.
Interviewed by Anastasia Svetlevskaya,
video: Diana Kolodyazhnaya
