Former Ukrainian Minister of Revenues and Duties Oleksandr Klymenko offered his assessment of the recently enacted military tax to support ongoing army activity in the strife-torn Eastern regions of Ukraine.
“I’m not going to enter into a debate about the fairness of this new tax, which places the burden of military actions on the shoulders of ordinary citizens,” said Klymenko.
“Let’s simply look at the implications of the legislation approved by Parliament. The new law does not differentiate between income levels – despite previous discussions – and therefore imposes the military duty on all taxpayers.”
The Ukrainian Parliament adopted a flat 1.5% military tariff into its tax code, to be in effect through the end of 2014. The Government of Ukraine, which has declared its treasury to be empty, hopes to receive around $240 million in increased revenue from the new tax to finance the country’s Armed Forces.
Klymenko, who served as Minister of Revenues and Duties from December 2012 to February 2014, analyzed the army tariff and predicted the Ukrainian Government would only succeed in collecting 10% of its projected figures.
One possible course of action which Klymenko apprehensively foresees the Government relying on to increase military tax collection is the application of “administrative pressure” on employers paying salaries under the table.
This approach would be further amplified by the indefinite postponement of reduced Unified Social Tax rates for businesses which is currently in effect.
Klymenko views the current activity in Kiev regarding Unified Social Tax-related matters as the continuation of a “nontransparent distribution of assets between funds” which leaves “taxpayers and businesses with no recourse but to act outside of the system.”