The mission of the International Monetary Fund (IMF) believes that the zero tax for voluntary disclosure (VD, amnesty of capital) is inappropriate, although the introduction of VD mechanism with 9% fee would allow expanding the taxation base, according to a report of the IMF posted on its website.

"Recommendations: Impose only the 9 percent VD Fee for disclosing foreign-held assets but keeping them offshore and incentivize the foreign asset disclosure and repatriation of assets with a 5 percent VD Fee," the IMF said.

"[Recommendations:] Do not grant a zero percent Fee for repatriated assets and reinvested in government securities," the fund said in the report.

The IMF mission recommends Ukraine to improve the corporate profit tax administration instead of replacing it by the exit capital tax.

"The mission examined the latest proposal to substitute the current Corporate Profit Tax (CPT) for a Distributed Profit Tax (DPT), in Ukraine also referred to as the Exit Capital Tax (ECT). The mission did not find any new elements to change the position expressed in FAD's previous technical report on tax policy (May 2017): the proposal is bad tax policy, detrimental for Ukraine on several fronts," the IMF said.

Firstly, it would risk a sizable loss in tax revenue on a sustained basis, conservatively estimated at 1.7% of GDP (2020-21), the IMF said. Additionally, the plan does not offer credible options for compensatory measures.

In addition, the claim that the DPT increases private investment cannot be taken for granted; there is no evidence to that effect in countries that have adopted it.

"Highly complex administration is foreseen contrary to widespread beliefs by the proponent of the ECT/DPT. Potential deemed dividend distributions need to be checked for every transaction, requiring extensive enforcement of transfer pricing rules, which in the current system is done typically on an annual basis, not transaction by transaction," the IMF said in the report.

The IMF said that Instead, upgrading the current CPT should be pursued, especially regarding aspects of international taxation given the plan to relax currency exchange controls. These controls have traditionally led Ukrainian businesses and individuals to keep reportedly large amounts of resources abroad, which have not paid income taxes in Ukraine.

As for BEPS (Base Erosion and Profit Shifting) bills, there is a good number of technical improvements suggested in this report for the proposed draft laws, particularly in relation to Controlled Foreign Corporations (CFC), Permanent Establishment (PE), Transfer Pricing (TP) and Interest Deduction Limitation rules.

"The recommendations largely favor simplifying rules, improving the definition of basic concepts, eliminating potential loopholes, and adhering more closely to international standards in some cases," the IMF said.

The IMF mission on November 22 ended its visit in Ukraine.