The personal income tax currently levied on the Ukrainian citizenry is computed using a scale other than that prescribed by the law, meaning that every month the Ukrainian taxpayers part with UAH 283.8 million above the amount legally required, totaling UAH 3.4 billion a year, says People’s Deputy Oleksandr Rzhavsky, vice president of the Ukrainian Association of Taxpayers.
Under the December 26, 1992 cabinet decree On the Income Tax of Citizens, which has the force of law, the tax rate is established proceeding from the minimum wage, currently set at UAH 118 a month. In actuality, the tax is levied in keeping with the State Tax Administration’s April 21, 1993 letter of guidance providing for a different ratio: minimum untaxed income (17 hryvnias); in other words, there was an unlawful substitution. Mr. Rzhavsky illustrated with the following example: the tax people deduct 17 hryvnias from UAH 118 worth of a wage tax- exempt under the law, and 45 hryvnias, instead of legally established UAH 18.20, from every 300 hryvnias. He believes that the income tax base must be precisely that minimum wage. He says that only such an approach is in conformity with Ukrainian legislation and can secure the taxpayer’s constitutional rights.
Mr. Rzhavsky further believes that Ukrainian citizens should no longer pay the income tax thus accrued, meaning that they should serve written notices refusing such payment to their respective managers, saying they are not going to pay more than is required by law. The managers, acting on the strength of such notices, would then notify the pertinent State Tax Administration authorities that from now on they will pay the income tax in strict accordance with the law. The mechanism of refunding money unlawfully collected, is contained in a bill Mr. Rzhavsky submitted to Verkhovna Rada. It comes down to raising the untaxed minimum wage to the living wage level and lowering the maximum tax rate to 10%.
An STA press release stresses that immediately lowering the tax or refunding such sums is practically impossible, for this would mean “a sharp decline in the material status of millions of citizens.” Without actually acknowledging the infraction, the publicans offer a cure-all: the new tax code (rejected in parliament). Incidentally, the existing contradiction must be eliminated at the legislative level, and lawmaker Rzhavsky might as well have addressed his grievances to his Verkhovna Rada colleagues.
INCIDENTALLY:
The STA regards the personal income tax rates set forth in the tax code bill as “analytically calculated,” stressing that UAH 6.2 billion has been received by the state budget in past nine months, making up 23.8% of all budget revenues for this period, and that all calls for lowering the income rate are absurd. Following such a scenario would mean “ instantaneous worsening of the material condition of millions of people,” Interfax Ukraine reported on October 11. The STA emphasizes that, by enacting the new tax code, Ukraine would have “Europe’s lowest personal income taxes” — 10% for citizens earning less than UAH 622 a month, and 20% for those with higher incomes.
