Any tax changes that are not formalized as a draft law on amendments to the Tax Code of Ukraine are mostly not even worth paying attention to. So a document called "strategy" with indicators like "during 2024-2030" does not cause excitement, only disappointment. Because it is about the "National Income Strategy" (document).
It was not for nothing that the process of its preparation was accompanied by such intrigue: oh, you will see everything in the strategy... the strategy will have all the answers to the questions... Our Western partners are working hard and tirelessly to help us create it... It is when a strategy is developed that our country can be successful and prosper!
This intrigue only increased the final disappointment.
Let's start with the fact that this is not a strategy. There are suspicions that the people who worked on this document do not really understand what a strategy is in general. There are also suspicions that Western partners helped very sporadically and did not see the entire text at all. And if they saw it, damn it, I wonder what their reaction was.
Apparently, after the revision was made public, someone hinted to the Ministry of Finance of Ukraine that the document was not developed well enough, because representatives of the Ministry of Finance of Ukraine quickly began to publicly justify themselves:
"The National Income Strategy is a framework document that serves as a guide for the implementation of reforms... At the same time, it is a flexible document that allows for the adjustment of the sequence of measures and content... In addition, the National Income Strategy is also one of the structural beacons... Namely, it takes into account the steps that Ukraine must take on the way to European integration...".
In order for you to understand the level of disrespect to the readers, European integration is taken into account in the strategy in the following way: "...it will take place in accordance with the Schedule of the implementation of obligations regarding the accession to the European Union, after its approval." And so after each "copy-paste" from European directives. If the European assistants did not work on this document free of charge, I would like to look at the budget.
The fact that the strategy is a "flexible signpost" is frightening, because it turns out that we do not even imagine where we would like to go and in which direction we are currently heading.
I won't bother retelling 147 pages in two paragraphs, but you definitely saw the main thing in the news: the simplified tax system will become more complicated, the simplified tax system of group 1 will be transferred to the rate of profit turnover, the rate for the simplified taxation of the 3rd group will go up to 18%. In addition, all transfers of profits not to the business account will be taxed at the same 18%, everyone will be forced to become VAT payers, the progressive scale of personal income tax will be returned and the "Mobile Anti-Corruption Center" will be introduced...
Why will all this be done?
It's hard to say... The only number we can rely on is 27% income growth in Gross domestic product (GDP) by 2030. Where, how and who came up with this 27%, cannot be found. There are no strategic explanations in the strategic document, there is a table with forecast macroeconomic indicators from representatives of the Ministry of Economy of Ukraine, but this table is made until 2026 and obviously does not take into account the measures proposed by the Ministry of Finance of Ukraine. The practice of giving two development scenarios "with reform" and "without reform" has not yet reached our latitudes. So, how much we will actually get in numbers after the reform is unknown, and empty talk about "increasing budget revenues on a sustainable basis" is unconvincing.
Unfortunately, the strategy ignores the strategic problems of the Ukrainian economy.
Shrinking the real sector of the economy and regional distortions are a problem. The problem is population decline, labor shortages, and glaring labor market problems. Growing imbalances in foreign trade, where technological imports are steadily growing and raw material exports are slowly decreasing, is also a huge problem.
All of the above directly affects the ability of our economy to get out of the crisis. All of the above can and should be adjusted, among other things, by the tax policy and practically not mentioned by the strategy.
The part dedicated to incentives for the development of the processing industry is indicative. In ten thousand characters, the authors tell us what they know about Ukraine's industrial backwardness, and they plan to evaluate the effectiveness of existing tax incentives for the development of processing and look for ways to modernize them. Somewhere, sometime in the future, all these initiatives will become a reality.
In theory, it is the fiscal policy that can be the main stimulus for business activity and investment attraction. It, thanks to the available simplified system for micro-businesses, should partially help in solving problems in the labor market. It has leverage for increasing the degree of processing and reinvestment in technological development. Only for this, the strategy should contain measures essentially opposite to those proposed. It is not a desire to take away the last from those who are still somehow trying to survive in our real sector, but to open a window of opportunities for the development of existing and the emergence of new businesses.
Increase tax collections not by increasing rates, but by increasing both the number of taxpayers and their incomes. This, by the way, is the most obvious approach.
If we still decide to follow the non-obvious path of fiscalization for the sake of growth, then we would like to at least see the arguments in favor of this choice.
Why, for example, an individual entrepreneur of the 3rd group, who is currently abroad, will return to Ukraine at a rate of 18%, if already now, in the status of a refugee, this person can open a local analogue of an individual entrepreneur with a rate in the range of 10-15%?
What will thousands of unemployed Ukrainians do if even the possibility of earning "for daily basic needs" in the "buy-sell" format is taken away from them?
Why will the widespread acquisition of the status of "VAT payer" bring us closer to the EU, where almost every country has stimulating VAT benefits for small businesses, up to its absence (and excise taxes, by the way, too)? Does it mean that the European Union countries need to stimulate their economies more than ours? And why don't we think about the development of our economy?
And what about the conceptual question of the effectiveness of the state? After all, if the officials want to make tax payments at the level of Norway, maybe, in that case, maybe public services should be provided at the same level?
Because it seems that even now we are paying a little too much. From 64 to 75% of respondents trust the professionalism and integrity of the State Tax Service of Ukraine, the authors of the strategy assure us, based on the data of the survey conducted by them for the money of international technical assistance. I would not pay for such a thing, considering that 57% of the complaints received by the Council of the Business Ombudsman relate specifically to the abuse of tax officials. Even the most painful issue of the last year, namely the blocking of tax invoices, is being resolved very sluggishly, and the number of blockings, despite the positive dynamics, is still 3-4 times (!) higher than the adequate level. At the same time, the number of complaints about inspections and about fictitious fines for using tax benefits introduced at the beginning of the full-scale invasion, about sanctions for not submitting primary documents destroyed during hostilities, is increasing. Are all these complainers the 25% who are not satisfied with the work of tax officials? But only the blocking of invoices still affects 28% of the entire real sector.
And how do you interpret the results of the survey mentioned in the strategy: 8% of respondents believe that in order to receive the services of the State Tax Service of Ukraine, you always have to resort to corrupt practices. And 28.2% of surveyed Ukrainians believe that corruption has to be resorted to in individual cases, and this indicates "a high level of perception of corruption among the population." If it were possible to refuse the services of the State Tax Service of Ukraine, believe me, the population of Ukraine would not wait for a single minute.
All these manipulations lead us to the following conclusion: the strategy will not change for the better not only the economy and fiscal policy, but it will also not affect the quality of the work of the fiscal officers themselves. Do not be surprised, but the State Tax Service of Ukraine is already "on the way to effective anti-corruption activities and complete rejection of corruption in any of its manifestations." And foreign investors, choosing between Poland and Ukraine, will, of course, choose us, because they sleep and see when our tax officials block a hundred invoices in one month, impose an unjustified fine, and after a court decision in favor of the payer, they stupidly refuse to fulfill it. This is an investment dream!
However, there is no need to panic prematurely, because it is unlikely that the creators of the strategy fully assessed their own ability to bite off the declared piece of reforms.
All changes related to payers are not possible without a unified data system about payers, their accounts and the movement of their funds. Moreover, we are talking about an impersonal system with coding of personal data (without a drop of irony, we thank the requirements of the European Union here). And, accordingly, the regulated procedure for operating this data system. It currently does not exist. During 2024, only its concept is planned to be created. And another year will be spent on preparing changes to the legislation and determining the system administrator (I don't even know who it will be). Sometime in 2026, the creation of the database itself will begin. Moreover, the very fact of its creation (and it is really not superfluous) does not oblige us in the future to accept all the tax innovations announced in the strategy.
We hope that by this time there will be intelligent and purposeful people in the country who will offer truly strategic solutions aimed at economic growth, improving Ukraine's competitiveness and its investment attractiveness. And we need to remember that we have less and less time for useful changes.