Taxation in Ukraine

Foreigner: I hear that many Ukrainians complain that taxes are too high in Ukraine, personal income tax, for example.

Ukrainian: I can’t agree with you here. The existing 15% income tax on personal income under 20 thousand hrivnas a year is not too heavy.

Foreigner: There are many rich people in Ukraine now. How are higher incomes taxed?

Ukrainian: Progressive income tax is applicable in such cases. The larger the income, the bigger proportion of it is paid as tax. The upper limit of the tax rate is 25% at the moment.

Foreigner: Do businesses involved in intermediary activities, including stock exchange activities, banking and insurance pay similar taxes?

Ukrainian: No, such businesses pay taxes on profit and insurance pay similar taxes.

Foreigner: Well, your profit tax is also comparable to other countries’ taxes, isn’t it?

Ukrainian: Yes, but the tax burden on businesses is too high, because along with the profit tax, enterprises pay VAT, excise tax, property tax and other local taxes. They also pay changes to the Pension Fund, Employment Fund, and Social Insurance and Medical Insurance Funds.

Foreigner: VAT and excise are indirect taxes which are levied on transactions and are included into the selling price. They are paid by consumers and not by producers.

Ukrainian: Yes, you are absolutely right, but higher prices often cause sales problems.

Foreigner: As to the VAT, do you use a flat rate for all goods?

Ukrainian: No, a reduced rate of 10% is applicable to foodstuffs and goods for children.

Foreigner: In this connection, are there many tax allowances in Ukraine now?

Ukrainian: Quite a lot, but in the situation of growing tax evasion the government plans to do away with many tax breaks.

Vocabulary:

complain – скаржитись

progressive income tax – прогресивний прибутковий податок

applicable – придатний, доречний

comparable – порівняний

excise tax – акциз, акцизний податок

charge – збір, відрахування

Pension Fund – Пенсійний фонд

Employment Fund – Фонд зайнятості

Social Insurance Fund – Фонд соціального страхування

Medical Insurance Fund – Фонд медичного страхування

selling price – продажна ціна

sales problem – проблема збуту

flat rate – однакова ціна

reduced rate – пільгова ставка

2. Read the dialogue, translate the Ukrainian remarks into English and act it out:

Foreigner: The tax system in Ukraine has changed significantly over the years of the reforms. But businessmen and individuals still complain that the system of taxation is unfair and inadequate.

Ukrainian: Так, це правда. Не дивлячись на величезну роботу в сфері податкового законодавства, що була пророблена за роки реформ, наша податкова система постійно критикується представниками бізнесу, законодавчою та виконавчою гілками влади. Враховуючи це, ми нині працюємо над податковим кодексом.

Foreigner: What concept underlies this document?

Ukrainian: Перш за все ми вважаємо за необхідне знизити податковий тягар на товаровиробника. Ми плануємо зробити це шляхом зниження податкових ставок, а також за рахунок поступового збільшення податку з фізичних осіб. Ми також маємо намір відмінити багато податкових пільг, які позбавляють бюджет значних податкових доходів.

Foreigner: Our tax system is based on the same principles and it works rather well. From our experience I can say that more emphasis should also be placed on tax collection in our country.

Ukrainian: Ви абсолютно праві. Наш уряд приймає міри щодо підвищення збирання податків, посилює контроль за особами, що мають високі прибутки, за платежами в Пенсійний фонд. Ми намагаємось закрити всі лазівки (loopholes) для осіб, що ухиляються від сплати податків. Ось суть нашої податкової політики.

Foreigner: Life shows that a system works effectively where the policies are right. Let’s hope you are on the right way.

3. Make up a dialogue on the following:

1. Discuss with your friend the differences between tax systems in Ukraine, Russia, United Kingdom and USA.

2. Speak about the tax evasion and tax avoidance. What is the influence of it on the economy?

3. Speak with your friends how could you reform the tax system in Ukraine.