Office of the President put forward a proposal
tax reform «all 10%»

Recently, the Presidential Office proposed a new tax model for discussion, called «10-10-10»: 10% – income tax, 10% – personal income tax and 10% – VAT, as well as the abolition of the EUS and the 3% military levy.

Let’s start with the positive: the fact that such a proposal appeared at all indicates recognition by the authorities:

• the need to reduce the tax burden and costs of tax administration;
• need to eliminate the sources of corruption that are «sewn» in the current tax system.

Now let’s discuss the voiced offer in the context of the real situation, challenges and threats facing Ukrainian producers of goods / services and consumers.

• The most serious threat of the proposed reform concerns compensators, i.e., sources of financing budget expenditures after the reduction of tax rates. The authors do not talk about a certain marginal level of state spending, the maximum permissible tax burden, but only about reducing the rates of three taxes. At the same time, they immediately recognize the possibility of raising other taxes: “From a purely tax point of view, we do not tax enough such things as environmental pollution or harmful consumption, i.e. tobacco, alcohol, oil products.” That is, the positive aspects of the proposed tax model (positive compared to the current situation) can and most likely will be destroyed by the redistribution of the tax burden, but not by its reduction or radical reduction in the size and functionality of the State.
• In addition, the proposed model rightly causes claims and complaints from the National Bank. According to one of the authors of the reform, «the emission of hryvnias can easily amount to 30 to 60 billion hryvnias per month.» With inflation over 30% per year, the destruction of the old structure of production and consumption, making such statements is populism. This is a mechanical transfer of fiscal policy problems to monetary policy.

A team of reformers who propose solutions in the field of tax policy in the name of expanding economic freedom cannot simultaneously stifle this same freedom with monetary policy.