Tax inspectors will be less busy

Back to Articles

The Verkhovna Rada approved in the first reading amendments to the Law on the Value Added Tax (VAT), stipulating a reduction of the tax from 20% to 17% starting from January 1, 2005 and to 15% starting from January1, 2006. The mechanism of the VAT refund from the budget was seriously revised: the function of refunding were assigned to the National Treasury, while the tax bodies are left with only the right to control and check the authenticity of the refund requested by a taxpayer. In addition, the draft law increases the limit of the annual volume of operations, starting from which the registration of a company as a VAT payer is obligatory. The new minimum is form Hr 61.200 to Hr 300.000 for the past 12 months.

In the amendments to the national budget of 2004 approved by the VR the Cabinet of Ministers is permitted to the register the VAT refund debt, which appeared as of June1, 2004 (the prior date was Nov. 1, 2003) in the form of T-bills. Interestingly, such a mechanism of paying off debt was criticized by President Leonid Kuchma at a recent meeting on VAT problematic issues. Indeed, the companies that are receive refunds from the budget do not want to register the debt in the form of T-bills (in essence, they will be lending to the state using their own working capital) and hope that it is refunded in monetary form. In January-May 2004, out of Hr 950 M subject to registration as T-bills for the VAT, only Hr 260 M were actually issued.

The new chief of the State Tax Administration (STA) Fedir Yaroshenko stated that he considers fulfilling the planned indicators for VAT a realistic task. He linked the task with the approval of the law on VAT accounts and expressed hope that the VR manages to do so after the summer recess. So far, as of June 1, 2004, the STA confirmed Hr 1.72 B in proceeds from the VAT, with the planned amount of Hr 2.03 B. It is worth noting that so far the shortage of proceeds cannot be considered significant, since the volume of VAT proceeds is seasonal. The approved amendments to the Budget 2004 increase the proceeds from the VAT by Hr 1.3 B to Hr 18.376 B. In addition, the presupposed VAT refund has been increased by the same amount to Hr 10.835 B. This means that the balance of the 'internal' VAT remained unchanged at Hr 7.541 B, which, in turn, means that collection of the main part of the VAT payments still lies ahead.

As has become common knowledge to economists, Ukraine has seen positive trends in economic growth in recent years. This fact was confirmed by the Rating & Investment Information, Inc. (R&I) international rating agency.

It improved the county's long term hard currency loan rating from B+ level to BB-. A week earlier, another well-known agency Fitch Ratings also improved the long term lending rating of Ukraine to 'positive'.

Business capitals of Western Europe and the U.S. have begun the formation of 10-12 funds, through which approximately US $1 B in portfolio investments could enter Ukraine as early as the second half of 2005, informed UkrSotsBank Supervisory Board and a member of the NBU Council Ihor Yushko. According to him, These are exclusively commercial funds intended to realize portfolio investments and make money, that is, operate on commercial principles.