“Major government initiatives that will affect business in the near future”, — write: www.epravda.com.ua
In the market economy, which also works in our country, an increase in business taxation affects the increase in the cost of production of goods or the cost of services. If the company’s tax burden increases, then the “check” for its goods, which is paid by the end consumer, also increases at the same time.
Therefore, every business tries to minimize its costs by introducing innovations, automation, reducing the costs of raw materials, personnel, paying taxes in order to gain a competitive advantage in the market at the expense of a lower price.
If innovation and automation are the white side of competition, tax minimization is the black side, which is punished by the state. Let’s recall the recent stories with “bonus” audio books in household appliances supermarkets, the crushing of large companies on the FOP network, VAT tax difficulties or other minimization schemes, which were recently presented by experts of the Institute of Socio-Economic Transformation and the Center for Socio-Economic Research CASE Ukraine in joint research.
Everything is done for the sake of increasing own sales (getting a larger share of the market), by attracting the interest of the end consumer with a lower price.
“Made in Ukraine” and “National Cashback” programsAt the beginning of 2024, the Ministry of Economy initiated “Made in Ukraine” programwhich should encourage the consumer to buy Ukrainian goods due to their labeling and brand recognition.
The stated goal of the program is to move from a raw economy to a processing economy, attract investments, increase the share of non-raw exports, and create new jobs. This issue also concerns national security – more Ukrainian manufacturers, less dependence on imports, more taxes for the army.
Of course, in addition to advertising Ukrainian products, their price and quality are also important, which is why the Ministry of Economy has initiated another “National Cashback” program to financially interest the final consumer in purchasing goods from a Ukrainian manufacturer. In case of purchase, the buyer is charged a “premium” in the amount of 10% of the purchase price.
The Ministry’s team paid a lot of attention to the preliminary communication with the society and discussion of the format of these two programs, and despite the critical evaluation from the think tanks, implemented them.
By joint assessment analytical centers, such a mechanism of “National Cashback” will distort the conditions of competition in the retail market between large retail chains, which already have dominant market power, and small manufacturers and distributors.
The main results of the program: more than 1,530 participating manufacturers, 307,000 product items, 3.5 million citizens involved in the program, 219 million UAH of cashback accrued.
Increasing the tax burden for white businessesAt the same time, the Ministry of Finance of Ukraine took the initiative to increase taxes, and the Government introduced draft law No. 11416, which provided for: the introduction of a military tax on turnover, a military tax for FOP, a military tax on cars, property and jewelry, an increase in the tax rate on profit for banks, advance payments for gas stations, taxation of international parcels.
Most of these initiatives were negatively perceived by both business and people’s deputies. As a result, the bill was not supported either in the finance committee or in the Verkhovna Rada hall. After its finalization and removal of most of the negative norms, the compromise text of the draft law was supported by people’s deputies on October 10 and sent to the President for signature.
Despite the difficulty of achieving this compromise, a single initiative of the Ministry of Finance of Ukrainewhich was not directed against white business, did not find its reflection – this is the rule on the cancellation of benefits in the taxation of international parcels.
“Grey schemes” and distortion of competition due to discounts on international parcelsIn a recent study of world experience regarding international parcels, the authors conclude that the European experience of taxation of international parcels is a balance of convenience for postal operators, customs authorities (simplicity of registration and taxation), end consumers (shorter time for customs clearance and payment) while preserving the interests of the state (absence of VAT benefits at customs) .
With such rules, products of domestic production and from abroad are under equal conditions of taxation. It does not matter whether it is a product of a domestic manufacturer or purchased on international marketplaces: eBay, Aliexpress, Temu and others, the value added tax will be paid by the end consumer and will go to the budget of Ukraine.
Thus, according to the Ministry of Finance, during 2021-2023, 153.1 million international postal and express items were sent to Ukraine. with a total value of UAH 157.5 billion, of which 58% are not subject to taxation due to the benefit. Conditional budget losses amounted to UAH 8.6 billion, and this is only at customs.
The majority of this product is sold on the domestic market without proper accounting and payment of taxes (from profits and salaries), so the budget losses and damage to domestic producers who do not have the opportunity to take advantage of such a benefit are quite significant.
According to the data of this study, the top 100 largest customers of international parcels in 2023 received 15.4 thousand parcels with a total value of UAH 76.1 million, that is, on average 154 parcels per person per year. Approximately 65% of parcels were cheaper than 150 euros and were not subject to taxation at all, the rest were taxed only in the part exceeding the preferential value in the amount of 150 euros.
We see that this privilege is actively used by the “shadow market”, which imports commercial batches of goods for further sale via the Internet or in another way, without paying taxes.
In such competition, the domestic producer, even with the support of the “Buy Ukrainian” and “National Cashback” programs, has no chance, the consumer chooses a cheaper product, which becomes so because of non-payment of taxes. Ukrainian retail is also facing problems, which, due to the discount on international parcels, found itself in unequal conditions with foreign marketplaces.
We hope that the Ministry of Economy will supplement its previous initiatives to support Ukrainian entrepreneurs with another one – the cancellation of tax relief for international parcels and, together with the Ministry of Finance of Ukraine, will submit a corresponding bill to the Verkhovna Rada.