Monday04 November 2024
telegraf.org.ua

"Increasing income taxes actually leads to a decrease in them," says economic expert Vladimir Dubrovsky.

When will taxes rise in Ukraine, and what new proposals are being introduced for individual entrepreneurs (FOPs) in 2024? Focus has investigated what the new law entails regarding this significant tax increase.
"Экономист Владимир Дубровский утверждает: увеличение налогов на доходы фактически приводит к их уменьшению."

What They Want to Add to the Tax Increase Law

According to Yuzhanina, during the working group at the Committee on Tax Policy, the provisions of bill №9319 were discussed, and it was decided to include details on compliance requirements for newly established residents of "Diia.City".

Закон о повышении налогов №11416-д предусматривает существенные изменения для ФЛП

In particular, newly established residents will not be subject to the requirement for a minimum number of employees (currently set at 9 people) with a salary exceeding 1200 euros during their first year of operation.

During the working group at the Committee on Tax Policy, the provisions of bill №9319 were discussed, and it was decided to add details on compliance requirements for newly established residents of "Diia.City".

Additionally, they want to include amendment №988 to the bill that is to be signed by the president, which aims to address the following issues:

  • exemptions for individual entrepreneurs (FOPs) regarding unpaid military tax during sick leave or vacation;
  • exemptions from unpaid military tax if the FOP is registered in temporarily occupied territories or areas of military conflict;
  • deferrals for payment of military tax for the first month after the law comes into effect, and the non-application of penalties for unpaid military tax for October;
  • non-application of the 5% rate on income subject to annual declaration for the results of 2024;
  • cancellation of the obligation to pay military tax if the FOP ceased its business activities from October 1 until the law comes into force;
  • allowing military tax to be credited when calculating the single tax for taxpayers of the single tax system, for whom military tax is introduced;
  • exemption from military tax for electronic residents (e-residents).

In addition to this list, during the working group, Yuzhanina's proposal to exempt FOPs of groups 1, 2, and 4, who are currently mobilized in the Armed Forces of Ukraine, from military tax was supported.

Повышение налогов по закону №11416-д означает снижение доходов украинцев

Tax Increases Mean Reduced Income for Ukrainians

Senior economist at CASE Ukraine and specialist at the Economic Expert Platform, Volodymyr Dubrovskyi, believes that increasing taxes will effectively mean a reduction in citizens' incomes.

"This essentially means an increase in taxes on citizens' incomes, which translates to a decrease in what employees take home as 'net' pay, and what entrepreneurs retain 'for themselves'. The decrease, to be frank, is not super critical, but still..." — said the economist.

Dubrovskyi notes that, in addition to the increased tax burden on citizens, which should be temporary, results need to be obtained from the reforms of the Bureau of Economic Security of Ukraine, customs, and taxation. This should impact the revenue side of the state treasury.

Tax revenues to the state budget in August 2024 amounted to 149.4 billion UAH, marking a 28% increase compared to the same period last year.

"These reforms can significantly disrupt the 'shadow' market and generate hundreds of billions for the budget, without affecting law-abiding citizens, and even eliminating unfair competition for 'white' businesses. When this happens, we must not forget to push for the cancellation of any surcharges, and perhaps even a reduction in tax rates, primarily on salaries and contributions," — noted Dubrovskyi.

Meanwhile, as indicated by a study from the Center for Economic Strategy, tax revenues to the state budget in August 2024 reached 149.4 billion UAH, an increase of 28% compared to the same period last year. The growth resulted from corporate profit tax (primarily the taxation of banks at a rate of 25%), personal income tax (transfer of "military" personal income tax from local budgets), and excise taxes (better administration). With the adoption of bill №11416-d on tax changes, the government expects an additional 58 billion UAH in 2024 and an extra 137 billion for the state budget of 2025.