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Ukraine Wins Praise For New Corporate Tax Reform Plans

by Ulrika Lomas,, Brussels

26 March 2018

Ukraine's announcement that it will shift the corporate tax burden from company profits to distributions has been welcomed by investors from Europe.

Earlier, during a meeting with representatives of foreign and domestic businesses on March 12, Ukrainian President Petro Poroshenko described the proposals as a "new philosophy" in taxation that would simplify tax for small businesses and lead to higher rates of investment.

"We are protecting small and medium businesses with this bill. It means significant simplification of accounting: you pay taxes for the sum you withdraw. What is left goes to the investment in business," he said.

Poroshenko suggested that the reforms could be phased in so they would apply to small firms before being extended to other businesses. "On the first stage we can spread this on small and medium business only in order to find compromise with foreign investors," he said. Poroshenko said: "This worked 100 percent positively in many countries, including Georgia, Estonia."

The announcement was welcomed by the European Business Association, endorsing proposals for the regime to be extended to small firms first. However, it recommended that the changes should serve to reduce the corporate tax burden, rather than being offset by other revenue measures, and that, at least initially, large companies should be allowed to elect whether to be subject to the new system of taxation.

The association supported the idea of piloting the system, noting that it will be important for authorities to review whether the system has been successful and whether it has a negative impact on voluntary compliance rates.

The association said that the corporate tax reform efforts should be coupled with tax cuts on labor. It said that a reduction to the labor tax burden will improve voluntary compliance rates and reduce the size of the shadow economy.

"We share the desire of the Head of State to a greater rate of economic growth. We hope that a balanced taxation system will be an important factor in achieving these goals," the association said.

TAGS: compliance | tax | investment | small business | business | accounting | tax reform | European Union (EU) | Ukraine | Europe

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