“PROMOTED. It is the duty of every responsible business to contribute its share to meet the needs of the budget.”, — write: www.epravda.com.ua
On September 17, 2024, the Verkhovna Rada in the first reading supported draft law No. 11416-d on raising the tax on bank profits to 50% by 2024.
There were many conversations around him − these were long and difficult discussions. The main thing that needs to be recognized now is that there is an urgent need for additional funding for the Army. According to certain estimates – at the level of UAH 500 billion for 2024-2025.
And I am convinced that it is the duty of every responsible business to contribute its share to meet the needs of the budget. Here you will not hear any doubts or objections from any banker – everyone is aware of their role.
Let me remind you that in the 1st quarter of 2024, the banking sector provided almost 70% of tax revenues, moreover, banks already work at an increased tax rate of 25%. This is currently the highest income tax rate in the economy.
Today, banking institutions respond quickly to the challenges facing the country’s economy: they implement special credit programs for distributed power generation, support the network of “Power banking” branches, fight against unproductive capital outflow, work on increasing the volume of lending, financing the state budget through investments in OVDP, attracting international loans
The main “donors”, the shadow and the luxury segmentThe need for additional funds was known at least six months ago, or even more. The “National Income Strategy” was also approved, which did not respond to the current challenge, and it should be urgently improved.
Instead, the draft law actively considers a new concept of tax changes, which actually makes the main “donor” income from the increase in military duty, which is a deduction from wages, income from deposits, cashback, winnings, additional benefits, etc. Although in the initial draft law developed by the Ministry of Finance, a significant part of the additional payments was to be provided by the business itself.
The voted bill also does not provide an answer to the question of reducing the volume of the “shadow economy”, which is exactly what the “white” business expected. In the same way, the idea of additional taxation on the purchase of luxury goods was rejected.
About equality before the law and social responsibilityIf we recall the tax rate of 50% for 2023, then we get the following result – if this change is made and accepted in two years, banks will be forced to pay income tax in the amount of 100% of the income for 2023.
If this were done once in 2023, some banks would be faced with the question of completely stopping lending. Even taxation at 50% creates significant limitations in the ability to form capital (and since September, new, stricter norms for capital adequacy are already in effect), and accordingly support the economy through lending.
Why the proposed decision on “super taxes” for banks is controversial:
1) A retrospective change in taxes violates the principles of the stability of tax legislation, as well as the equality of all taxpayers before the law, regardless of the form of ownership and the place of origin of the capital (clauses 4.1.2 and 4.1.9 of Article 4 of the Tax Code of Ukraine).
Increasing taxes retrospectively will in no way contribute to the attractiveness and predictability of the investment environment, but will only emphasize the riskiness of the regulatory environment and reduce the desire to invest in Ukraine, where the rules of the game can be changed “retrospectively”.
2) This will not contribute to the Government’s fulfillment of its commitments to the IMF regarding the privatization of state-owned banks. Accordingly, it creates obstacles for receiving the next tranches of international support from the IMF. Is it necessary now to create additional obstacles in the implementation of the Memorandum?
3) If we talk about a real increase in revenues to the state budget, then we should exclude taxation of the profit of state banks (this is practically 70% of the profit of the system), and focus only on increasing revenues from private banks.
Currently, the banking sector remains the only industry where shareholders do not receive any dividends at all. And the additional extraction of profit through extra taxes categorically reduces the interest in investing and the willingness to take additional risks in terms of increasing lending in wartime.
Foreign owners of banks have a special situation, because they are also taxpayers abroad, including Ukraine receives financial assistance from their funds. It turns out that the foreign investor “pays twice”: once abroad, and part of the funds goes to help us, and there is an extra tax in Ukraine. Is this approach really a search for internal sources of budget financing?
4) In the near future, the stress testing of banks will begin, the terms of the “transitional period” for the calculation of capital and requirements for borrowers will expire. This means that already in the near future some banks will need additional capital to ensure stable operations and, in general, the possibility of lending in the future.
Let’s also remember that in order to finance the Army, in addition to taxes, the Government needs to attract about 350 billion UAH through the sale of OVDP bonds (just compare with the expectations of revenues from bank surcharges of UAH 19 billion over two years). Currently, the main holders of state debt securities are once again banks, for which we hear constant criticism for some reason.
The ability of banks to finance the state budget deficit through investments in OVDP is also determined by the level of capital and profit of the current year. Therefore, raising the tax to 50% creates significant risks of covering the deficit somewhere in the amount of UAH 200 billion.
Therefore, I hope that these additional billions will be attracted precisely through investments from businesses, which will thus take an active part in supporting the Armed Forces. In such a situation, I think it would demonstrate the social responsibility of entrepreneurs.
It may be worth holding an open meeting with leading companies at the level of the Ministry of Finance and discussing business investment plans in OVDP. It would be no less important if government officials and people’s deputies of Ukraine joined the purchase of OVDP, because they, like no one else, are aware of the state’s urgent needs.