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Simplified Tax System: Why Authorities Do Not Like It

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Volodymyr Dubrovsky, CASE Ukraine`s senior economist, told ‘UBR’ media outlet that the simplified tax system does not hurt the budget as much as it is thought to be.

The expert proposes to focus on the elimination of schemes that mostly harm the economy and prevent its developing.

According to Volodymyr Dubrovsky, it is necessary to strengthen the control over the transfer pricing. Using it, one withdraws annually about 10% of GDP abroad. First of all, we are talking about the use of offshore for the withdrawal of profits abroad (budget losses of USD 50-65 billion per year). ‘That is, in fact, we drop one more yearly amount of income tax revenue’, the economist says.

The second question is customs violations. At the third place, you will find schemes for the transfer into cash (losses USD 12-15 billion yearly).

At the same time, one estimates withdrawal of profit through pseudo-self-employed individuals as high as UAH 0.7-3 billion. Because of it, the budget is short of UAH 1-1.5 billion. We should add to that saving on taxes from the salary budget through registration of employees as self-employed persons. After use of simplified tax system, total losses for the budget from are no more than UAH 10 billion per year.

In Ukraine, according to the expert, there are also very few unregistered small businesses. When compared with the developed countries, its role in the economy is very small. There are many small entrepreneurs. Since even small violations (in monetary terms) are perceived as massive and large.

November 7, 2017