PROSPECTS AND DISADVANTAGES OF RADICAL TAX REFORM

Abstract

The article examines the essence of the proposed tax reform based on the "10-10-10" model, its shortcomings and prospects for its possible implementation. This reform envisages the reduction of several key tax rates to 10%: the income tax will be replaced by a tax on withdrawn capital, the value added tax is proposed to be replaced by a tax on retail sales. The personal income tax, which is currently 18%, will be reformed and gradually its rate will also reach 10%. In addition, it is proposed to cancel the uniform social contribution of 22% and increase the military levy from 1.5% to 3%. It is also planned to eliminate a number of taxes and fees. For some taxes, a transition period of 5-7 years is provided. Exact tax rates and the plan-schedule of their changes will be determined after building the model and forecast calculations. The authors of the reform are convinced that if the reform is launched, there will be a critical improvement of the tax climate in the country, which will contribute to the intensification of business activity, an increase in capital investments, and in the strategic perspective – a significant increase in tax revenues with the possibility of achieving a budget surplus. It is important that the business supports such a taxation system. Fully transparent payment of taxes at "adequate" rates, with a significantly reduced bureaucratic mechanism of administration and checks, is important to any businessman. Opponents of the radical tax reform point out that the reform directly violates Ukraine's obligations under international treaties, in particular regarding the value-added tax rate. After the end of the war, Ukraine will need significant investments in the reconstruction of the destroyed infrastructure. That is why it is necessary to implement measures to minimize security risks already today. Among the tax disincentives for investments in Ukraine, investors name complex tax administration. It is very important that tax legislation should be stable and clear, and paying taxes should be easy.