The fight over higher taxes continues

Public reactions, particularly from the business community, to increasing taxes continue to mount as the bill makes its way through the Verkhovna Rada, Ukraine’s parliament.

Where the law’s at: Ukraine’s parliamentary Tax Committee approved a draft law on increasing taxes after it passed in the first reading last week.

The draft law’s key provisions haven’t changed, lawmaker and committee member Yaroslav Zhelezniak said.

Among those provisions are an increase of the added military tax from 1.5% to 5%, higher taxes for self-employed people, a 50% tax on bank profits, and a 25% tax on financial institutions.

The draft law will be considered in parliament for a second reading this week. Over 1,388 amendments have been submitted, according to Zhelezniak.

As a reminder: The country is facing a $35 billion budget deficit next year, and as Russia’s war continues in its third year with no end in sight, the country needs to find funding to keep its economy afloat and finance its war effort.

What they’re saying: Ajax Systems founder and well-known business figure in Ukraine Aleksandr Konotopskyi has taken to social media, calling on the government to do more to go after corrupt businesses that evade taxes.

“It would be better if you left the economy alone. While there is still something left to leave alone at all,” Konotopskyi said in a Facebook post.

In comments to Forbes, investment fund Dragon Capital head Tomas Fiala agreed with Konotopskyi, saying that the government has done too little too late to raise the necessary funds to finance the country and its defense.

“The government needs to do its part and finally show zero tolerance for corruption, shut down the shadow economy, and make sure everyone pays their fair share of taxes,” he told Forbes.

Fiala believes the best way to increase taxes would be through increasing the value-added tax — an idea supported by the Finance Ministry and International Monetary Fund but rejected by President Volodymyr Zelensky’s office and Cabinet of Ministers.

Other business people interviewed by Forbes echoed these sentiments and called on the government to focus on reforms, particularly in customs.

A law reforming the sector was recently passed in parliament and is waiting to be signed by the president. Pushing through customs reform may have been a way for the government to quell some of the concerns of business, although not to much avail.

“It is not necessary to raise taxes for white businesses but to fight the more than 40% of those who work in the shadows. They have a competitive advantage due to tax evasion,” Oleksandr Sokolovsky, CEO of fabrics maker Textile-Contact.