The Ukrainian Government offers comprehensive
changes in the taxation of wages. The Prime Minister of Ukraine Arseniy
Yatsenyuk said at a session of the Cabinet of Ministers on Wednesday, August 6.
The head of the Government noted that
in Ukraine a lion's share of wages is paid "in envelopes": "The
shadow economy, the shadow wage, afterwards - the absence of pensions, social
benefits and allowances. It also entails the lack of revenues in the state
He reminded that the overall burden
on the wage funds in the EU member states amounts about 36%, in Ukraine - 55%.
"The load on payroll in Ukraine exceeds by 20% the showings of more
competitive and stronger markets - those of the European Union".
The current salaries contain, he explained,
two parts which are paid: 41% is the unified social tax and the income tax for
physical persons - 17%.
The Prime Minister explained that
the Government offers for discussion several approaches of “such qualitative
and major changes” in the taxation of wages.
One of the variants is as follows:
“We propose to establish a fixed payment for an employee – it is the minimum
wage, which equals 41%. Everything higher than the minimal salary is offered to
be taxed at 15% instead of 41%. Almost three-fold reduction of the unified
“Another model is we fix taxation of
the minimum wage as 37%, by this we reduce the basis by 4%, but all the sums
which exceed minimum salary are the subject for taxation in the amount of 19%,
instead of 15%,” the Head of Government explained.
He set an example. The average
salary in Ukraine is UAH 3650, three minimum wages. Under the current procedures, the total amount
of payments to the budget out of these funds makes up UAH 2126. Applying the
models the Government offers, the payments which are due to be send to the
budgets out of this sum (UAH 3650) reduce practically by UAH 700: “And it means
the incomes of ordinary citizens will grow by UAH 700”.
“Our proposition implies the reform
of the unified social tax – which means taxation of the minimum wage at the
fixed rate, while everything exceeding this fixed sum – at the level of 15%,”
the Head of Government explained.
Arseniy Yatsenyuk stressed in order
to avoid “holes” in the Pension and other funds the Government offers to act
“according to a social justice principle” – which means to change the taxation
system for incomes of physical persons: “The one who earns more pays more. The
one who earns less pays less”.
“Hence, we legalize and deshadow
salary, threefold reduce the load on payroll. But those who earn a fortune fulfill
their social function – they pay taxes. By these taxes we compensate a hole
which will appear in the budget for pensions and other social allowances,” he
The Cabinet of Ministers has
proposed six patterns of taxation of incomes of physical persons. The Head of
Government appealed to the entrepreneurs while discussing this issue to choose
the most optimal model of taxation of incomes of physical persons.
Besides, the Government offers to unify
rates for passive incomes of physical persons: “Now there are a lot of them. If
the rates are different, everyone is trying to escape from taxation. We
consider a single rate should be applied to passive incomes, it is 15%”.
This rate won’t be applied to dividends as
they are subject to income tax. “We cannot afford double taxation, so a special
taxation procedure is to be applied to dividends,” Arseniy Yatsenyuk
Apart from that Arseniy Yatsenyuk informed the
State Fiscal Service suggests to cardinally change approaches in tax
administration, in particular to fix a single report period: “All the reports
ought to be issued once a quarter”.
“We shall go along the way of
reducing the number of not only reports, but payments as well,” the Head of
Government said. Moreover, the State Fiscal Service will introduce “a single
window” reporting system.
“This is the first block of our tax
and economic reform. There were 22 taxes – there will become 9. Earlier the
income tax was paid on the basis of tax reports, we
will abolish that and will pay on the basis of accounting records. A number of
taxes will be upgraded and transformed by us, we will radically improve tax administration
and a system of paying taxes,” Arseniy Yatsenyuk summed up.