Yanukovych lobbies for voter-friendly tax hikes

By bne IntelliNews July 3, 2012

bne -

Ukrainian President Viktor Yanukovych called for tax hikes on July 2, targeting high earners, real estate and mineral extraction, as Kyiv seeks ways out of the deep fiscal hole in which it lies without provoking the population ahead of parliamentary elections in October.

Reflecting the nearness of that vote, Ukraine needs to extend the progressive nature of income tax, which currently applies only two rates: 15% and 17%, in order to ensure social justice, the president said.

"The scale of the progressive tax should be extended on the basis of fundamental forecast-based estimates. In particular, it is appropriate to increase the number of the scale divisions, having raised the rate for the wealthiest citizens," Yanukovych said, as cited by Interfax-Ukraine. "And what is most important is the need to introduce a reduced rate for low-income individuals," he added.

Vice Premier and Social Policy Minister Sergiy Tigipko late in 2011 proposed a tax on wealth, which should introduce, among other things, a raised upper level on individual incomes from 17% to 20%. Prime Minister Mykola Azarov has recently spoken out in favor of an increase in the upper level to 30-35%.

Yanukovych also called for real estate tax to be leveraged more realistically. "This symbolic tax should turn into a major source for pumping up local budgets and a tool to limit speculation in real estate," he said.

Moving on, the president complained that mineral production and environmental taxes are too low in Ukraine. "Unfortunately, we still do not use to the full the potential of taxation of economic activities related to mineral production," he said, adding that the sectors are subject to far lower levies than in the EU.

"The proceeds from mineral production and environmental taxes in the European Union constitute about 4% of GDP, and in some countries up to 15%. In our country this indicator barely exceeds 1% of GDP," the president pointed out.

Rounding out the plans, Yanukovych also said that the list of excisable goods should be extended. First of all, the goods that are dangerous to human health should be included on the list, the president said without specifying the goods in question.

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