Quickly – does not mean good: dangerous consequences of adoption of the Tax Code
Business daily "Ekonomicheskie Izvestia" together with the Association of Chartered Certified Accountants (ACCA) held a conference "Tax Code. The first step of tax reform” that took place in Kyiv, Ukraine on 23 September 2010.
One of the highlights of this autumn, that will be if not to determine, then at least, substantially influence the pattern of development of Ukrainian economy, is a discussion on the adoption of the Tax Code.
It is no secret that the code will affect virtually everyone – big and small businesses, accountants, government officials and tax authorities, employers and workers, the majority of Ukrainian citizens. At the same time, obviously, the Tax Code is not the end of the tax reform, but rather its beginning, its basic element, and it is understood that construction on poor foundations – is doomed.
The general tone of the conference was set by the Head of the Council of Entrepreneurs at the Cabinet of Ministers, Leonid Kozachenko, who, though acknowledged imperfection of the existing draft, considered it necessary to note that failure to adopt the Tax Code now will create more problems than if it is not adopted at all. He also pointed out that it is still possible for business community to provide comments and input into the draft Tax Code.
Opponents, by contrast, predict massive discontent in the case of the Government's draft, which contains a lot of technical mistakes. Particular concern was expressed to the design based on the raw code of the State Budget-2011.
In particular, the draft Code does not provide for assignment of a number of expenditure on gross expenditures of enterprises. "Draft Code prohibits referring the costs of royalties, marketing, consulting, advertising, engineering services, which are paid by Ukrainian companies to foreign companies. This ban will negatively affect transparent transnational corporations and will not contribute to the investment attractiveness of Ukraine” – said Vyacheslav Vlasov, Partner at PricewaterhouseCoopers Ukraine. He also noted the need to include the possibility of further discussion and amendment to the Code within 1-2 years after its adoption in the transitional provisions of the Code.
The greatest dissatisfaction of the conference participants was caused by the rush of government in drafting a code and its intentions to put in force starting from January 1, 2011.
According to Grigoriy Pavlotsky, Partner at Deloitte, such goal of the Government is very risky. It is very difficult to rebuild the entire legal tax base, and for business it is very difficult to prepare for such changes. After all, companies are already budgeting the next year, and in December, people still do not know which indicators to use to plan their business in 2011.
"It is unclear how accountants will have time to adapt so quickly, and will not make mistakes, for which liability is provisioned" - supported Olena Volska, FCCA, Managing partner of Emergex Business Solutions.
Remark about the hasty introduction of the code, was made by overall tolerant Chas Roy-Chowdhury, Head of taxation at ACCA, pointing out that in United Kingdom, even some smaller changes to norms are being discussed for six to nine months.
"It is easy to compile the tax legislation together and call it the Tax Code. The essence remains the same. And it is simple - head of the State Tax Administration is responsible for the income part of the budget, and monthly he is informed of income plans. The Code does not destroy this system, does not impose a new ideology of taxation "- summed up the General director of the analytical center "BEST" Valery Gladkiy.
Vladimir Kotenko, Partner at Ernst & Young tried to somewhat lower the overall degree of discontent with the draft Code, describing it as being mainly the compilation of already existing tax rules. "The measures proposed in the draft in order to soften the blow from the operational implementation of this document are likely to be palliative. It is about the initiative not apply fines to taxpayers within six months after the entry into force of the Code. While limiting the sanctions with Code, the risk of criminal liability remains"- he said.
"Yes, we do not have the tax code, but you can not adopt it just for ticking a box" - summed up Iryna Ped, Tax advisor of the bar association "ST Partners”.
Remarks of Yuri Delikatny, Head the tax department of law firm «Noerr», that it is important to demand that adoption of the Tax Code will be postponed, otherwise it would entail a number of negative consequences, outlined the next steps of business in the dialogue with key developers of the draft.
It should be noted that adoption of the Customs Code is approaching, promotion of which is likely to be carrier out by scheme tested while developing the Tax Code. But this is a topic for entirely different discussion.
"The conference outlined the issues and questions professional market participants have to work with" – summed up Dmitry Goryunov, Chief editor of "Ekonomicheskie Izvestia". It is impossible that document that does not meet the basic interests of at least one of the parties, is adopted as a basis for the entire tax system. From this point of view «Ekonomicheskie Izvestia» can provide a unique platform for discussion, where different parties can share their views and be heard, and this will only benefit the tax code in particular, and our society as a whole.
Partners of the discussions, organized by the ACCA and the newspaper "Ekonomicheskie Izvestia" were: the company Arzinger, EBS (Emergex Business Solutions), bar association" ST Partners, audit and advisory firm Baker Tilly Ukraine, a law firm «Noerr», Gestalt Consulting Group. General Media Partner: Expert magazine, general TV partner: - First Business Channel. Media partners: Industrial Television Committee, All-Ukrainian Advertising Coalition, Ukrainian Association of Publishers of Periodical Press, American Chamber of Commerce.