The International Monetary Fund mission has at last resumed loan talks in Kyiv. It is going to finally decide whether or not to give Ukraine a 12to19billiondollar loan, which our government is looking forward to as if it were manna from heaven. (The opposition estimates the government is facing a UAH 170 billion budget hole.) What exactly is the mission going to clarify in Ukraine? I think it is mostly interested in and worried about the following question: will we be able to refund the enormous funds we are asking for if we are unable to fill our own state budget? The government’s chief response are the Budget Code and the Tax Code which have been passed in the first reading in parliament and are part of the structural reforms the Party of Regions is carrying out to solve Ukraine’s budget problems. At first glance, these codes are not supposed to belong to the socalled unpopular reforms. Besides, the Cabinet has already done something to this end. Unfortunately, not all of its attempts were successful. One can even say the government has lost information war to the opposition. One should perhaps reflect in this case on whether the current “handicap of reputation” given to the YanukovychAzarov government is sufficient for carrying out the socalled unpopular reforms.
Iryna Bekeshkina, manager of the Democratic Initiative foundation, announced last Friday the results of a survey conducted by this organization. They say that 54.4 percent of those polled positively assess Viktor Yanukovych’s first 100 days in office, 25.7 percent take a negative view, 60.1 percent believe or hope that the president will keep his election promises, and 34.1 percent are doubtful and are sure he will fail to do so. The prime minister has a somewhat worse social support. 52.4 percent approve and 29.2 percent disapprove of his appointment as premier. 49.1 percent and 29.1 percent, respectively, have positively and negatively assessed his first 100 days. Still lower are the grades given to the Cabinet for its first 100 days: 42.6 percent positive and 29.7 percent negative. “The current government is really enjoying public trust and support,” Bekeshkina concludes. “The question is whether it will be able to turn this support and these hopes to advantage.”
The impression is that, seeking the IMF’s favor, the government has put its reputation on one scale and the two abovementioned codes on the other. This set the scales into motion, thus reducing trust in the government. On its part, the opposition was not slow to seize on this mistake and, so to speak, rushed headlong to slam their opponents’ “achievements.” And the government? It allowed the opposition to frolic as much as it could, almost without defending its positions at a professional level, unless, of course, we consider as a compelling argument the premier’s announcement that “a large group of linguists was invited for the first time to take part in drawing up the law (code. – Ed.).”
Arsenii Yatseniuk, an MP and Front of Changes leader, has compared the Ukrainian economy to a “dead cow” and the draft governmental Tax Code to a “milking machine” for this cow. He focused on what he thinks is the most acute problem in the Tax Code: “Now taxmen are authorized to come and search your home.” He also resents the intention to introduce a tax on banking deposit interest: “In the economy, this means the increase of credit interest rates, on the one hand, and reduction of individual incomes, on the other.”
Exminister of finance Viktor Pynzenyk is also highly critical of the government’s innovations in taxes and the budget. He is convinced that these documents are of a very low value as far as the IMF loan is concerned. The exminister thinks that budget deficit reduction is the only measure that guarantees success in this field. Asked by The Day about the likely consequences of the tax bill being voted into law, Pynzenyk said that, while announcing tax cuts, the government will in reality be raising them.
In his opinion, the tax cuts logic demands that budget expenditures be reduced first of all. “If this is not done,” the exminister notes, “additional taxes are being levied under various disguises. For example, the VAT is not being refunded. As a result, the profit tax is now in fact 40, not 25, percent.”
Only a blind man will fail to notice the problems that may arise should the Tax Code be approved. Ukraine’s Ministry of Justice has come up with a 23page list of critical observations about this document. Yet the minister, Oleksandr Lavrynovych, believes that the draft law’s overall direction is right. He is sure that all the drawbacks will be corrected before a second reading. But can it be true that the government is so quietly reacting to criticism because it knows how all these “bumps” and “potholes” found themselves in the text? It is a bureaucratic ploy well known since the Soviet era: absolutely unacceptable provisions are being deliberately inserted into the document under discussion, while clearly positive provisions (luxury tax in this case) are being withdrawn. The goal is to listen to criticism and pretend to put everything in order, hiding some much more important traps, which the “faultfinders” have not yet come across, deep inside.
Leonid RUBANENKO, president, League of Tax Consultants, Ukraine:
“The draft Tax Code is not worth even being commented on, let alone being criticized. For it does not answer the questions the economy is putting today, although it is supposed to take development requirements into account.
“This document is even throwing this country and its economy backwards. I am mostly critical of the chapter ‘Administering.’ There are as many snags in the chapters dealing with the profit tax and the valueadded tax, which do not reflect at all the requirements of business people.
“The same applies to, for example, assets management, taxation of the facilities that have a network of subsidiaries, the right to cut greenhouse gas emissions. This list can be continued ad infinitum. As is known, the devil hides in details.”
P. S. A civic organization, Modernizing the Country, is launching a nationwide collection of signatures against the approval of the government’s version of the Tax Code, UNIAN quotes the Modernizing the Country coordinator Valentyn Nalyvaichenko as saying this the other day in Poltava at a meeting with local entrepreneurs.
He emphasized that the new code “increases the tax bodies’ punitive functions, which will result in greater extortion.” “Besides, tax police is being vested with greater powers – this will create a tax NKVD of sorts,” Nalyvaichenko warned.
