The International Monetary Fund (IMF) mission finished its week-long work in Kyiv on May 28. During the concluding press conference head of the mission Chris Jarvis said that the main purpose of the mission’s visit was to discuss the consultations on Article 4 of the IMF agreement with Ukrainian officials. And though the visit had no official reference to the allocation of the next tranche of stand-by credit, the conclusions on economic welfare in Ukraine drawn by this commission will be essential while settling this matter. The IMF chief inspector hinted at this during the press conference.
“At this moment we are waiting for the government to approve and implement a number of specific arrangements. As soon as they [the government. – Author] make the decision and are ready to do this, we can proceed with the discussions on financing,” he clarified the conditions of return to the discussion of the text tranche of credit.
Judging from what Jarvis has said, the set of requirements remains the same: increase of the gas tariffs for the population, reduce of Naftogaz deficit, and keeping the budget deficit at the same level. The last one received a special emphasis. “The amendments to the budget include increased spendings on salaries and pensions, and the increase in the budget revenue is planned to finance it. In order to keep the budget deficit at 1.8 percent of GDP, as it was planned by the government, new measures need to be taken,” he said. According to Jarvis, such measures include the increase of wealthy citizens taxation, reduce of the tax exemptions, or limitation of budget expenditures.
Will Ukrainian government accept the advice and raise taxes for the rich? Ukrainian leaders have not yet given the answer to this question. However, on the eve of the press conference with the head of the IMF’s mission, The Day talked to a few officials who expressed their opinions on the increase of wealthy citizens taxation.
Minister of Finance of Ukraine Yurii Kolobov said that at present each employer paid a bit over one hryvnia of taxes and social contributions for each hryvnia of wages. “I think it is too much. We are going to reduce this amount,” Kolobov added. When The Day asked for his opinion on the increase of the taxes for the rich, the minister said that it was a complicated matter and it needed a more thorough approach and discussion. “It cannot be just said that the big ones have to pay more than the small ones. There are industries that can pay more, but there are ones that cannot,” he said. Firstly, all the options need to be considered before making such decisions to keep the budget revenue stable and give business a possibility to develop comfortably. The minister did not say whether his ministry was going to take this step or no. Though he hinted that the ministry of finance promoted another interesting initiative – raise of the rent for subsurface use. If it is supported by the government, wealthy Ukrainians who are involved in mineral resources extraction will have to pay more.
Head of the Parliamentary Committee for Finance, Banking, Tax, and Customs Policy Vitalii Khomutynnik opposes the increased taxation of the wealthy. Today the load is heavy enough the way it is, with all the taxes and social funds contributions, he sums up in the conversation with The Day. On the contrary, the taxes should be reduced, Khomutynnik said.
Will rich Ukrainians sleep peacefully? It depends on the decision made by Ukrainian government, which has to be an arbitrator in the matter “To pay or not to pay more.” In the other countries this matter is not brought up anymore, because the level of social consciousness of business went beyond the limits of worrying about itself only long ago. An initiative by American billionaire Warren Buffett stands as a clear evidence of this. He urged the US Congress to raise the taxes for the most wealthy Americans in order to reduce the country’s budget deficit. “While the majority of the Americans are trying to make the ends meet, we, the mega rich people, are still receiving huge tax benefits,” Buffett made a reasonable statement quoted by Bloomberg. According to his calculations, in 2011 Buffet paid 6,938,744 dollars of taxes, or 17.4 percent of the annual taxable income. “And in percentage this is less than any of the 20 workers in our office pays. Their tax load varies from 33 to 41 percent of income,” Buffett said. The American businessman thinks this is not right.
