Increasing taxes for individual entrepreneurs: What exactly could change for entrepreneurs this spring?

The Cabinet of Ministers of Ukraine wants to impose a military tax on private entrepreneurs. Chairman of the Finance Committee of the Verkhovna Rada Daniil Getmantsev spoke about this during the telethon.

According to him, the Ministry of Finance is currently working on a relevant draft law. They are trying to increase state budget revenues to receive an additional 44 billion hryvnia.

Getmantsev noted that they also plan to increase the military tax and introduce such a tax on individual entrepreneurs, as well as legal taxpayers of the single tax, certain types of transactions related to real estate and jewelry.

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Not just military training: what changes can be made?

as described Focus Oleg Pendzin, economist, member of the Economic Discussion Club, military service is paid from the individual’s income. The income of an individual entrepreneur is considered entrepreneurial. They were never given military service. Now in VR they want to introduce a new military tax on individual entrepreneurs.

“Currently, there is no such provision in the legislation. This is an innovation. This is not the only innovation. There are many other things offered to increase income. What is the situation today: Today the IMF has an obligation to increase state budget revenue by UAH 44 billion. A bill has been prepared that aims to introduce a military tax on individual entrepreneurs, additional payments on real estate, jewelry and similar transactions. There is already a bill on irregular income. We are talking about the income of teachers, taxi drivers and the like. For example, if you worked during the day and took a taxi in the evening… You do not pay tax on this income, but it is thought that this income should be taxed. There’s a lot of innovation there, but for now it’s just talk. Neither specific rates nor conditions for the accomplishment of such things are yet being discussed. The Economist noted that these are today’s recommendations of the Finance Committee of the Verkhovna Rada.

What exactly is being proposed in the war tax bill?

Yuri Gaidai, senior economist at the Center for Economic Strategy, focuses on the IMF’s commitment to develop a package of short-term revenue mobilization measures that will provide additional income of 0.5 percent of GDP in 2024.

The Economist presented a detailed analysis of the tax increase announced by Daniil Getmantsev on his Facebook page.

“In fact, we have committed to the IMF to develop, by the end of February, a package of short-term measures to mobilize revenues that will provide additional income of 0.5% of GDP in 2024 (by the way, if we take the IMF forecast, then this is 44 38.2 billion UAH, not 2. According to the text of the second revision of the IMF program, it is important that these measures are “triggered” in case of additional (sic!) spending needs. Gaidai said: “There does not seem to be a need for additional spending. However, in the absence of foreign aid, the financing of existing spending will continue.” “There is a need. I don’t know if this will be a trigger or not,” he wrote.

He also analyzed the main proposed measures for possible innovations.

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According to him, the decision on the equitable distribution of the defense financing burden is long overdue.

“According to my calculations, the introduction of a 1.5% military tax on the turnover of the third group will bring about 10 billion UAH per year. I do not know what base and rate the Armed Forces are considering for 1-2 groups, but I do not see any significant income potential here. In total to EH in 2023 about approx. “They paid UAH 5.3 billion,” he added.

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Regarding the additional military duty for buyers of banking metals from banks from the first registration of cars in Ukraine sellers real estate, gold, platinum and gemstone jewelery retailers and mobile phone providersAccording to the expert, such an innovation could replace the “luxury tax”.

“The devil may be in the details, but overall it’s clear. Especially for a jewelery company whose pension has already been controversially cancelled,” he added.

Gaidai described the increase in excise taxes on fuel to “minimum EU standards” as “harsh” and reminded the existing excise taxes. According to him, to reach the level of EU minimum rates, the excise duty for gasoline needs to be increased by 69% (+6 UAH per liter), and for diesel by 138% (+8 UAH per liter).

“According to our estimates, an increase of all excise taxes on fuel by 50% (gasoline+4.5 UAH/l and diesel +3 UAH/l) will bring about UAH 30 billion annually to the budget. fuel demand and supply of counterfeit products “The EU minimum An immediate increase in rates would of course bring more, but this would be a significant inflationary pressure and a significant incentive for illegal producers and sales. I think SCT rates will increase. eventually it will increase, but only moderately.” Gaidai provided the insight.

He also called for waiting for the details, because so far the proposal for military training for FOPs has not been specified, since much depends on the state of the budget deficit and assistance from partners.

Let us remind you that Ukrainian farmers, agriculturists, individual entrepreneurs in the field of IT and logistics can receive international grants to develop their own business.

Meanwhile, Prime Minister Denis Shmyhal answered where to obtain money for the additional needs of the Armed Forces of Ukraine. According to the head of government, the Council of Ministers is consulting directly with the military on meeting defense needs.