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If ‘Shadow Economy’ disappears, collapse happens

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CASE Ukraine`s senior economist Volodymyr Dubrovsky commented to the ‘From-Ua’ media outlet on the tax reform`s pitfalls.

The mass non-payment of taxes is indicative not only for Ukraine.

If you look at the problem as a whole, then tax evasion, on the one hand, is bad. Because it causes unequal conditions for those firms and people who are paying all taxes and those who dodge. It contributes to the erosion of morality in society, and it is not good.

On the other hand, from an economic point of view, if those nominal taxes that we have established were paid, then our economy would suffocate.

The main tax we have for today is still indirect – it is VAT and excise duties. People just have to understand that every time they buy goods in the store and receive a check where VAT is included, they pay a tax. Some later this shop transfers this tax to the budget. But, in fact, these people themselves paid for it.

Strengthening penalties for non-payment of taxes will not help. This is a completely wrong way.

Trust in state institutions is very low, and it is justified because it does not actually work for the benefit of people.

Today, if taxpayers suddenly started paying taxes at those nominal rates, with the broadest possible basis that someone could only imagine, most likely, the state budget would receive much more, maybe, by 30% more. However, the economy would suffocate.

We vote for moderate taxes, which are difficult to avoid. These taxes pay all or almost all, with minimal control. Because any control is corruption.

July 25, 2017