Ukraine TB/HIV Concept Note Outcomes of TRP GAC and Grant Making PlaceDay Month Year 1.
CONCEPT For reforming the tax system of Ukraine
description
Transcript of CONCEPT For reforming the tax system of Ukraine
CONCEPT
For reforming the tax system
of Ukraine
Cutting taxes and fees
Current taxation system:
22
Proposition:
9
Cutting taxes and fees
Abolished:
Fee for certain types of entrepreneur activity (currently paid by 123 000 subjects)
Fee as a surcharge for the natural gas to be paid by consumers of all types of ownership
Rent for transporting oil and its by-products via main pipelines and oil networks, transit transporting gas and ammonia through the territory of Ukraine
Parking fee for vehicles
Tourism tax
Fee for viticulture, horticulture and hop growing
Cutting taxes and fees
Transformation:Excise tax
Excise taxFee for primary registration of vehiclesEnvironmental tax (from fuel)Fee as a surcharge to the existing tariff for electricity and heating except electricity generated by cogeneration plants
Environmental tax (except for fuel)Environmental tax
Fee for specialized use of forest resource
Payment for use of natural resources
Rental feeFee for use of radio frequency resource of Ukraine
Fee for special use of water
Tax on real-estate except for land propertyReal-estate tax
Payment for land
Single taxSingle tax
Fixed agricultural tax
Cutting taxes and fees
Conversion of taxes from national to local:
Real-estate tax
Fixed agricultural tax
Reform of corporate profit tax
Single tax based on standard financial reportsTaxation basis: financial result defined according to standard financial reports, adjusted for a limited number of tax differences.Number of taxable differences reduces from 49 to 3:
Depreciation Forming reserves Financial operations (securities transactions, interest cost)
Including differences regarding: expenses for education, repair, business trips etc. to be abolished
Reforming of agrarian sector
90.2%9.8%
remain under special regime
transfer to general system13.5 thd
1.5 thd
47.7%
52.3%
96.6%
3.4%
remain under special regime
transfer to general system
45.9 thd
1.6 thd
criterion 1:Annual amount of
earnings under UAH 20 mln
criterion 2:Farmland area under
ha 3 thd
Area proportionQuantity proportion
Quantity proportion Earnings proportion
67.7%32.3%
CONCEPT
for reformingwage tax
in Ukraine
Malta
Bulgaria
UK
Portugal
Ireland
Cyprus
Croatia
Romania
Lithuania
Slovakia
Luxembourg
Latvia
Spain
Poland
Danmark
Estonia
Slovenia
Germany
Greece
Netherlands
Sweden
Czech Republic
France
Hungary
Finland
Austria
Belgium
Italy
Ukraine
Euro zone
EU-28
23.3
24.5
25.2
25.4
28.7
28.8
29.2
30.4
31.9
32.3
32.9
33
33.5
33.9
34.4
35
35.6
37.8
38
38.5
38.6
38.8
39.5
39.8
40.1
41.5
42.8
42.8
54.538.5
36.1
9
General tax load* on salary incomes in Ukraine exceeds 1.5 times those in EU-27
EU36.1%
UA 54.5%
* Sum of total wage taxes against total salary incomes
TAX LOAD ON WAGES (INCOME TAX + social insurance), %, 2013
Plain decrease of rates of SST and IIT to average EU level would significantly reduce
cash flow from SST and IIT
Background for reforming SST: Statistics of Ukraine and UN
10
0 - 0,5 МЗП
0,5 - 1 МЗП
1 - 2 МЗП
2 - 3 МЗП
3 - 10 МЗП
10 - 17 МЗП
понад 17 МЗП
0
5
10
15
20
25
30
35
40
5.78
9.70
37.2
2
24.7
0
22.0
0
0.50
0.09
6.40
17.3
7
34.8
5
16.8
1
22.8
1
1.16
0.60
Бюджетний сектор Приватний сектор
0 - 0,5 МЗП
0,5 - 1 МЗП
1 - 2 МЗП
2 - 3 МЗП
3 - 10 МЗП
10 - 17 МЗП
понад 17 МЗП
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
0.41
2.88
23.3
4
27.2
1
42.1
4
3.05
0.97
0.58
5.19
17.8
8
16.4
0
44.6
1
6.12
9.23
Бюджетний сектор Приватний сектор
In Ukraine over 70% of employed people get monthly payment less than 3 minimum salaries (МЗП). Incomes of these people make up over 50% of total salary incomes..
Structure of salary incomes in 2013 EMPLOYMENT RATE, %.
Structure of salary incomes in 2013 INCOME RATE, %
Background for reforming salary taxes
Single social tax (SST): reform patterns
Payroll
Accruing SSTat a rate from 36.76% to
49.7% (depending on risk class)
Payroll
Fixed SST At a rate 41% of minimum salary
(in 2014 – UAH 499.38 )
Current model New Model 2
SST percent rate15%
charged on salary exceeding minimum salary
Withholding SST from salary
at 3.6% rate
Withholding SST from salaryat 3.6% rate
Payroll
Fixed SSTAt a rate 37% of minimum salary
(in 2014 – UAH 450.66 )
New Model 1
SST percent rate19%
charged on salary exceeding minimum salary
Withholding SST from salaryat 3.6% rate
Incomes amount UAH 143.5 bln
Incomes make UAH 141.1 bln
Incomes amountUAH 189 bln
Wage taxation: IIT and SST
Criterion Current pattern Model 1 Model 2
Accrued salary 3650 3650 3650
Charged IIT on salary (Employer)
IIT rate 40.2% 37% МЗП + 19%
excess
41% МЗП + 15%
excess
IIT amount 1 467.30 912.74 864.18
IIT withheld from wages (Employee)
IIT rate 3.6% 3.6% 3.6%
IIT amount 131.4 131.4 131.4
IIT
Rate 15% 15% 15%
Amount 527.79 527.79 527.9
Total amount of SST + IIT 2 126.49 1 571.93 1 523.37
UAHExample based on IIT rules and offered SST patterns
IIT (individual income tax): Model 1
Monthly salary
Under 10 MS (minimum salary)in 2014 – UAH 12180
Current model
IIT rate
From 10 MS2014 – UAH 12180
15%
17%Charged on excess
sum
Monthly salary
Under 10 MS(in 2014 – UAH 12180)
Proposed model
IIT rate
from 10 to 17 MSin 2014 – from UAH
12180 to 20706
15%
20%Charged on excess
sum
Over 17 МSin 2014 – over UAH 20706
25%Charged on excess
sum
Additional earnings can amount around UAH 3.5 bln or 5.7%
IIT earnings in 2013made up UAH 58.9 bln
Monthly salary
Under 10 MS(in 2014 – UAH 12 180)
IIT rate
from 10 to 40 MS(in 2014 – from UAH 12
180 to 48 720 )
15%
20%Charged on the
excess sum
From 40 MS(in 2014 – over UAH 48
720)
25%Charged on the
excess sum
Additional earnings can amount aroundUAH 2.5 bln or 4.3 %
IIT (individual income tax): Model 2
IIT earnings in 2013made up UAH 58.9 bln
Monthly salary
Under 10 MS(in 2014 – UAH 12 180)
IIT rate
From 10 MS(in 2014 – UAH 12 180)
15%
17%Charged on the
excess sum
Current model Proposed model
from 1 to 10 MS(in 2014 – from UAH 12180
to 12180 )
from 10 to 40 MS(in 2014 – from UAH 12180
to 48720 )
15%
20%charged on excess
sum
from 40 MS(in 2014 – over UAH 48720 )
25%charged on excess
sum
Under 10 MS
(in 2014 – UAH 12180)10%
Additional earnings can amount aroundUAH 4.7 bln or 8 %
IIT (individual income tax): Model 3
IIT earnings in 2013 make up UAH 58.9 bln
Monthly salary
Under 10 MS(in 2014 – UAH 12 180)
IIT rate
From 10 MS(in 2014 – UAH 12 180)
15%
17% charged on excess
sum
Monthly salary IIT rate
Current model Proposed model
Under 5 MS
(in 2014 – UAH 6 090)
from 5 to 17 MS
(in 2014 – from UAH 6 090 to 20 706 )
15%
20%charged on excess
sum
Over 17 MS
(in 2014 – UAH 20 706)
25%charged on excess
sum
Additional earnings can amount aroundUAH 5.1 bln or 8.5 %
IIT (individual income tax): Model 4
IIT earnings in 2013 make up UAH 58.9 bln
Monthly salary
Under 10 MS(in 2014 – UAH 12 180)
IIT rate
From 10 MS(in 2014 – UAH 12 180)
15%
17% charged on excess
sum
Current model Proposed model
Monthly salary IIT rate
Under 3 MS(in 2014 – UAH 3 654)
from 3 to 17 MS(in 2014 – from UAH 3 654 to
20 706)
15%
20%charged on excess
sum
Over 17 MS(in 2014 – from UAH 20 706 )
25%charged on excess
sum
Additional earnings can amount around UAH 8.9 bln or 15.2 %
IIT (individual income tax): Model 5
IIT earnings in 2013 make up UAH 58.9 bln
Monthly salary
Under 10 MS(in 2014 – UAH 12 180)
IIT rate
Over 10 MS(in 2014 – UAH 12 180)
15%
17% charged on excess
sum
Current model Proposed model
Monthly salary IIT rate
Under 1 MS(in 2014 – UAH 1 218)
From 1 to 17 MS(in 2014 – from UAH 1 218
to 20 706)
15%
20%charged on excess
sum
Over 17 MS(in 2014 – over UAH 20 706)
25%charged on excess
sum
Additional earnings can amount around UAH 14.7 bln or 25 %
IIT (individual income tax): Model 6
IIT earnings in 2013 make up UAH 58.9 bln
Monthly salary
Under 10 MS(in 2014 – UAH 12 180)
IIT rate
From 10 MS(in 2014 – UAH 12 180)
15%
17% charged on excess
sum
Current model Proposed model
Monthly salary IIT rate
Additional earnings can amountUAH 1.5 bln
Individual Income TAX: Unification of passive income rates
IIT earnings in 2013make up UAH 0.7 bln
It is offered to unify IIT rates for all types of passive incomes: in particular:
Passive incomes considered as dividends paid to individuals who don’t pay income tax should be charged at 15 % IIT rate instead of 5%
Administration of taxes
Single accounting period – quarter – regarding principal taxes: Income tax, IIT, VAT, SST, Excise, Environmental tax, etc.
Effect – reducing number of reports and payments a year: Cutting expenses of the state and business resources for administration of taxes Simplifying conditions to pay taxes, improvement the presentation of Ukraine in
the Doing Business ranking
Single window of issuing accounts and records
Tax records, SST reports and statistics should be submitted to a single body
Effect – cutting time for reporting
Financial decentralization
Budget autonomy
Decentralization
KEY LINES OF CHANGES
Budget decentralization
Transfer of certain part of national taxes to the local budgets
New system of budget equalization
PRINCIPAL DIRECTIONS OF REFORMS
Capable communities
Independent planning and approving of local budgets
United communities get authorities as regional centers United communities receive direct budget relations
Certain part of national taxes is transferred to the local budgets
Ability to maintain local budgets in banks
Simplifying of procedures to obtain local guarantees to get loans from IMF
Further steps of the Government in decentralization:
-Supporting changes to Constitution of Ukraine directed to power decentralization
-“On local self-governance in Ukraine” (new edition)
-“On voluntary association of territorial communities”
-“On the grounds of regional state policy”
-“On decentralization in the construction area – delegation of responsibility to the local authorities”
- “On municipal police”
CREATION
OF
FINACIAL INVESTIGATION SERVICE
State Fiscal Service of Ukraine
Money Laundering Prevention Department
Tax police subdivisions
Ministry of Interior Main Department for Organized Crimes(to prevent economiccrimes)
Department of the State Service for prevention economic crimes
State Security Service of Ukraine
Main department on counterintelligence protection of public interests in economic security area
Central executive authority to protect economic security of the countryFinancial Investigation Service of Ukraine
Confirmed by the experience of Italy, Sweden, Austria, Poland, Georgia, the U.S. A.