In Ukraine at the beginning of last year, significantly reduced the tax burden on wages (the SST was reduced from 41 to 22%). A few years ago, the government (at that time under the leadership of Arseniy Yatsenyuk) has announced plans to reduce the tax burden to 20%. This, according to officials, would increase the number of jobs and pull the economy out of shadow. Now every Ukrainian citizen pays from his salary of 41.5%. Part of the entrepreneurs state that a large load does not allow to create jobs and makes the work “quasi-legally”. At the same time, experts are sure that Ukrainians do not pay more than its European neighbors, and to stimulate the creation of jobs need other methods.
According to estimates of the Ministry of social policy, 40% of the payers of social tax from the salary declared minimal. In fact, the lion’s share of employers provide employees on the minimum wage and underpaid envelopes.The website “Segodnia” gathered expert opinion on why in Ukraine the part of the salary is “in the shadows”, and whether to reduce the tax burden.
The state has to give almost half the salary
The tax burden on wages in Ukraine is 41.5%. 18% – tax on income of individuals (pit), 22% – Unified social tax (Ust) and a 1.5% military tax. Personal income tax redistributes between local and state budgets, with 2/3 of the tax in the local budget. These money are used for realization of city programs is repair of roads, schools, building parks, and so on.
A large part of ERU goes to the Pension Fund (82,5%, the rest to insurance funds in cases of unemployment and disability). There’s money to redistribute between existing pensioners. However, resources are sorely lacking and the hole you have to patch the state budget.
Last year the Ust rate significantly decreased (from 37 to 22%). Reducing the burden on wages has allowed employers to dramatically increase wages. However, this opportunity was used not all – as they say in PF, the majority of employers are “saved” funds were considered additional profit.
Photo: archive
The tax burden in Ukraine is high can not be named, said the managing partner of Baker Tilly Alexander Pochkun. According to tax expert, tax cuts at the moment is not worth it. “The single social tax – the main source of replenishment of the Pension Fund and to talk about what the rates should be reduced without a fundamental reform of the pension system, it is impossible. Now I see no possibility to reduce the tax burden. There are personal income tax, but it is the main source of income of local budgets. If we climb in personal income tax, then it must determine by what local governments should implement its programmes. Moreover, local budgets took away the excise tax, they have remained a tax on land, property and NDFL”, – Alexander Pochkun.
At the same time an expert in the field of pensions Galina Tretyakov is sure that the tax burden must be reduced, and the minimum wage are not taxed. “We need to introduce a system of taxation of households. For example, a pair consists of two children and parent, they take taxes on income of natural persons. They are at the end of the reporting year shall be a Declaration. In this Declaration you need to say, as earned. I do not propose to tax the 3200 for each family member. If it is five, then this amount must be multiplied by five and twelve. And the amount of the overpaid tax should come. If a shifted fiscal year, it will return to the New year. I say that it will be as MPE, Yes, but people should make sure to get the money,” explains Tretyakov.
The lion’s share of employers are “hidden” from taxes
According to various estimates, from 40 to 60% of employers are part of the salary is paid in envelopes. The head of one of Ukraine’s largest regional business unions Elena Eremenko believes the only solution in this situation – to reduce the tax burden. Business really works “in the shadows”, but the other way, according to Elena Eremenko, at the moment.
Businesses have to fight for markets. And most often won by those who have products cheaper. One of the easiest ways to reduce the cost of production – minimize income. Those who work “in white”, losing in the competition with “grey” business.
“But even if the whole business at the same time begin to work “in white”, taxes will be passed on to the cost will be another problem – the purchasing power is low and if this is not the products of the first necessity, people will stop buying it. Payment “vbeluyu” of all taxes this reduction in domestic investment opportunities, not funds to expand their business. It’s all a vicious circle,” explains Elena Eremenko.
By the way, the European average tax burden on wages is around 40%, some of the highest taxes in Germany (more than 50%, dependent on income). “There are a number of European countries where the tax burden is even higher than the Ukrainian. This and the Baltic countries, Germany,” – said Vice-President of the Ukrainian Union of Industrialists and entrepreneurs Sergey Prokhorov.
A few years ago, at that time Prime Minister Arseniy Yatsenyuk promised to significantly reduce taxation of wages – up to 20%, and Ukrainians with the minimum wage is exempt from tax.
Why employers pay “in envelopes” and will the tax cuts
Tax any entrepreneur is positioning itself as a cost, says Alexander Pochkun. According to experts, the tax cuts will not help to increase wages or to stimulate the creation of jobs. “The owner doesn’t pay a high salary just because he has moral obligations. He will pay that salary, which is formed by the market. If he has character traits that allow him to pay above market, then this will only be done in order to attract more high-quality personnel. All”, – Alexander Pochkun.
Entrepreneurs are “hidden” from taxes due to low profitability. “Margin low, no margin of safety. There is no money to pay more. My opinion – not the taxes of the main causes of “salaries in envelopes”, and the state of the economy. No big demand, there is a great income, save, strive for the lowest prices. The economy is no margin of safety. When the entrepreneur has no money, then he is terrible, and the taxes terrible and the new technology is scary” – said Sergey Prokhorov. At the same time, the expert believes that reducing the tax burden without economic development situation will not change.
“We need to create products with high added value. In conditions when production has a very low profitability at best 10-15%, it is not possible to do upgrades and at the same time to increase wages. And to do it constantly in order to remain competitive, to improve its efficiency”, – said Sergey Prokhorov.
Photo: archive
The level of shadow economy in the first place shows the level of trust of business to the state, said General Director of audit company “Baker Tilly Ukraine” Alexander Pochkun. “This element of trust to the state, the higher the credibility of the state, the lower is the shadow economy. I am not inclined to link the shadow economy to the question of the survival of enterprises,” says tax expert.
Chief expert of the Council of entrepreneurs under the Cabinet of Ministers Andrei Zablovsky believes that to reduce the tax burden for detinitely salaries, but this decision should be implemented in combination with other.
“The package of measures will allow businesses to pay salaries “vbeluyu”. We need to create conditions for those who work in the shadows, that it was beneficial to work legally. While that in Ukraine is more profitable to work honestly. Lowering the fiscal burden should be one of the incentives. But many companies are already practicing. There are ways of motivation. When you create new jobs you can release from the SST, when you start the project can be exempt from taxes. This will stimulate the creation of new industries,” – said the expert.
