Prospects for the Tax Reform «10-10-10» in Ukraine

Abstract

In the wake of the war in Ukraine and the rapid spread of the COVID-19 pandemic, many businesses have either suspended or closed their operations. The introduction of martial law requires rapid adaptation of tax legislation to new realities. To do this, the State must, in particular, distribute its burden to promote the survival of businesses in the wartime conditions. One of such plans is to carry out the tax reform «10-10-10», which provides for amendments to tax legislation, revision of preferential taxation of certain business segments and reduction of basic tax rates. Making adjustments to these tax rates will lead to serious changes in the State budget itself. The main taxes that will be changed during the reform are VAT, personal income tax and business income tax. Analysts argue that reducing them to 10% and strengthening tax control over entrepreneurs and enterprises will lead to the withdrawal of a significant part of business from the «shadow». The important point is that, in contrast to reducing the rates on basic taxes, the authors of the reform propose to strengthen control over the activities of not only registered entrepreneurs, but also the population that receives income without registering as a business entity. This will entail an increase in fines for violating tax legislation. Among the important shortcomings of the reform are the potential increase in the budget deficit resulting from a significant reduction in taxes, as well as the conditions of the European Directive 112, which Ukraine has to adhere to within the framework of European integration and according to which the VAT rate cannot be less than 15%. In turn, the advantages are strengthening tax control, de-shadowing the economy and reducing the tax burden on the wage fund, improving the standard of living of the population, supporting business and attracting foreign investment. Thus, after a detailed consideration of the reform, familiarization with the opinions of leading experts and a brief analysis, it can be argued that in such a difficult situation in which Ukraine finds itself now, it is appropriate to make fundamental changes to the tax system in order to improve the financial condition of the population, enterprises and the economy in general.

Keywords

• tax reform «10-10-10»
• taxes
• tax system
• covid-19 pandemic
• war in ukraine