18:54 16.09.2020

Tax hikes to balance budget categorically unacceptable - EBA

3 min read
Tax hikes to balance budget categorically unacceptable - EBA

Raising taxes to balance the budget is categorically unacceptable for businesses, the European Business Association (EBA) said in a press release.

"From open sources, the European Business Association received the text of the draft amendments to the Tax Code, which does provide for an increase in the tax burden on business, but we hope it was just a bad joke," EBA Deputy Director for Advocacy Svitlana Mykhailovska said.

Earlier, the Cabinet of Ministers, together with the draft state budget for 2021, submitted proposals for amendments to the Tax Code of Ukraine, according to which it is proposed to increase excise tax on alcoholic drinks, environmental tax, rent for the use of radio frequencies by 11.6%, according to the forecast inflation rate in 2020, and by 12% in accordance with the forecast of growth in prices for industrial products, royalty for the use of mineral resources.

"After all, it is important to support companies now, and not to create additional obstacles for transparent business activities, so that entrepreneurs can continue their work. Thus, businesses hope that the draft will provide an effective automated mechanism for the timely refund of export VAT in accordance with the procedure and procedures in force during 2017-2019," the document states.

"Given the global health crises caused by the COVID-19 pandemic, it is necessary to apply the provisions of Article 5 of the law on state financial guarantees of public health to implement the program of medical guarantees with the one-year budget no less than 5% of the country's GDP," it says.

"Also, the draft budget for 2021 provides for a significant increase (almost 40%) in revenues from alcohol production. This figure is understandable, as the alcohol industry has been demonopolized by law which creates the possibility for the privatization of distilleries and the development of production. But for transparent work, it is necessary to adopt updated conditions for licensing such production," according to the report.

"Also, it should be noted that the excise tax on imported wine products and beer will be among the main funding source which is planned to bring more than 50% revenues. But the highest revenues are expected from imports of tobacco, tobacco products, and liquids for e-cigarettes (almost 3.5 times more than the draft budget for 2020). Given that the provisions on the labeling of liquids have not yet been approved and companies will not have time to test such a process, and therefore they cannot import liquids, there is a risk of shortfalls in the budget at the beginning of the year. Therefore, it is more than welcome to postpone the period for unlabeled liquids that have already been imported into Ukraine. Businesses have repeatedly appealed to the government to "freeze" rates due to market stagnation and instead take measures to combat the illegal market, from which the budget can receive significant revenues. We hope that the voice of business will be heard and the increased rate of 11.6% will be reviewed," the EBA said.

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