One of the main debates held currently in the Parliament concerns the further destiny of the taxation system for private entrepreneurs. Of course, the attention of mass media is attracted by the “hot” topics, however, it should be noted that it is the possible “tax counter-reform” that may influence the state of Ukrainian economy in the nearest future.
In the beginning of March, two lawmakers from the Petro Poroshenko Bloc “Solidarity” registered the bill No. 8089 with a long, 5-line title, which includes such words as “the reformation of the simplified system of taxation.” According to the authors, this initiative is aimed at the economy unshadowing. However, their formula of “reformation” in reality may cause the diametrically opposite effects.
The bill completely abolishes the third group of single tax payers and introduces significant restrictions for the activities of the entrepreneurs of the 1st and the 2nd groups. For example, according to the authors, the single tax payers of the 2nd group have no right to work in premises with the area of more than 20 sq.m. or to have more than two venues, as the lawmakers see the signs of corruption in this…
Do they look for corruption in the right place? According to the estimates of the international researchers, 45% of Ukrainian economy is ‘in the shadow.’ But I would like to propose those, who see corruption exactly in the system of small business taxation, to pay attention to the real ‘black holes’ for the budget, which appear because of the merger of the power and big business.
The authors of the bill give an example: when an employer pays ₴10,000 to the worker as a salary, he/she will have to pay ₴1,267 of taxes in case when the employee is registered as an individual entrepreneur, or ₴4,150 – when the employee is registered as a hired worker. Then, they make an absolutely absurd conclusion that both the employer and the employee are “corruptionists” because of the reasonable choice of their strategy.
If there is something inadequate in this example, than it is the unreasonably high tax rates, which should be paid by entrepreneurs for the hired workers. And the authorities must fight against high taxes instead of tax payers. Will it really lead to the economy unshadowing if the business is deprived of the existing alternative? I think that everything will be quite the contrary: a worker will continue working but unofficially and there will be no taxes for the budget at all.
However, this example is particular. The majority of individual entrepreneurs is, in fact, a self-employed population, private entrepreneurs, not just the hired workers. During the last year and a half, due to the decisions made by the authorities, the number of individual entrepreneurs reduced by 20%. Nevertheless, these 1.76 million remaining private entrepreneurs are still the support of the state, as they fill the budget with taxes. It is business that pays for all popular initiatives of the authorities – without taxes paid by the entrepreneurs, the increased wages and the up-to-date pensions would be just impossible.
Nearly 156,000 active private entrepreneurs are currently registered in Kharkiv oblast. But the attack on the system of “single tax” concerns not only their interests. It will affect everyone. The connection is very simple: any deterioration of conditions for small business will immediately affect the prices on their goods and services, and then will intensify the pressure on the labour market due to the shutdown of small enterprises.
It is a direct path towards the weakening of our economy and the increase of emigration flows, and the active, purposeful and enterprising people will be the ones to leave. Enterprising is a key word here, and I believe that in its mentality Ukraine is a country of the active entrepreneurs, not the subsidy receivers dependent on the state.
There is a hope that the bill will never become a law. At least I am going to make everything possible for this. It is necessary to protect the simplified system of taxation for private entrepreneurs, and thereby to defend the interests of all Ukrainian consumers of goods and services provided by small business.
The President’s position on this issue inspires optimism: he has recently declared in public that he does not support the abolition of the simplified system of taxation, while the latter, by the way, is one of the IMF’s demands.
I hope the authorities will have enough political will not to look for a black cat in a dark room, calling private entrepreneurs the main source of corruption and economy shadowing. Small business is not an enemy. It is the state’s partner. And if the authorities are not ready to help it so far, then, at least, they should not preventing it from working.
