The business community united by the American Chamber of Commerce in Ukraine (ACC), the European Business Association (EBA) and the Union of Ukrainian Entrepreneurs (SUP) is deeply concerned about the adoption of Draft Law #1210 dated August 30, 2019 “On Amendments to the Tax Code of Ukraine on Improvement of Tax Administration, Elimination of Technical and Logical Inconsistencies in Tax Legislation” in the first reading.
Undoubtedly, it is essential to amend the Tax Code of Ukraine in order to implement the Base erosion and profit shifting (BEPS) Plan. At the same time, the Draft Law #1210 foresees a large number of changes that can lead to increase of fiscal pressure against bona fide taxpayers, deterioration of the investment attractiveness of Ukraine, as well as negatively affect development of the country's economy as a whole.
In particular, the key concerns of the business community that should be revised and amended are related to the following proposals:
- Increasing capacity of fiscal authorities to apply penalties
- Possibility of extending the duration of tax audits
- Removal of restrictions on requesting the information by tax authorities from business
- Selective significant increase of the tax burden on certain industries such as mining, metallurgy and tobacco
- Lack of a clear for a taxpayer algorithm of determining a reasonable economic cause (business purpose)
- Large-scale amendments to transfer pricing rules
- Increase of tax burden due to interest deductibility limitation, in particular, no carry forward of non-deducted interest due to thin capitalization
- Introducing of VAT on some export operations (exports below production cost)
Considering that the implementation of amendments proposed by the Draft Law #1210 in current wording can significantly harm Ukraine’s investment climate and economy, experts of the member companies of the Chamber, the EBA and the SUP call for ensuring the most transparent, proficient and constructive process of preparation of Draft Law #1210 to the second reading with a detailed study and broad discussion of proposals with the business community. Predictability and prudence of changes in tax legislation are a priority for the business community.
The schedule for further work on Draft Law #1210 should be set up in the light of the fact that the business community should have sufficient time to carefully work out the proposals. There should also be sufficient time to properly discuss the submitted proposals with the authorities.
We urge the authorities to pay attention to the proposals of bona fide business that pays taxes and replenishes the country's budget and does not interfere with its activities by hastily adopting unbalanced tax rules.