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Remove All Unnecessary. What Should Tax Reform Like Be

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Volodymyr Dubrovskiy, CASE UKRAINE`s Senior economist, comments for Lіga.Fіnansy media outlet on what kind of business problems should be solved with the tax reform.
Paying taxes has been and remains in Ukraine, the biggest obstacle for developing the state policy-related business. Not only entrepreneurs overpay the ‘state’ services, they are challenged to endure a lot of inconveniences – the unpredictability of the size of payments, the need to negotiate, to pay bribes, not to mention about the actual design of reporting, taking into account the conduct of non-tax accounting and other technical difficulties.

The reform we talk about is to solve two key problems.

Firstly, it is designed as far as possible to eliminate discretion. That is, the ability of making decisions by officials and other state agents ‘at their option (discretion)’. If there will not be such an opportunity, there will be no occasion to extort (and to give) bribes. Tax liabilities to become transparent. Paying taxes procedure to be simplified radically and to become ‘civilized’, without muddy negotiations and blackmailing.

Secondly, the tax structure itself today is not meeting our capabilities in terms of state governance and the needs of economic growth, especially of economic restructuring. In particular, there are too many direct taxes in our system. They lay taxes directly to businesses and citizens. According to the OECD guidelines, to accelerate economic growth and reduce corruption one should replace such taxes with the indirect ones and especially with property taxes. The last were collected on a level which is less than 1% of GDP.

Read the full article [in ukrainian].

September 27, 2016