13 July 2021

Taxation defined by the Draft Law 5600 may seriously compromise Ukrainian business climate, thinks Mykhailo Kuhar, a leading national macroeconomist, the editor of the Ukrainian Economic Outlook and MIM-Kyiv MBA, and visiting professor. He shared his opinion on MIM-TV, a digital platform for MIM-Kyiv’s extra curriculum activities. 

Ukraine is now witnessing a positive correction after the downfall of the national economy caused by the pandemic. The correction may delay the negative consequences of the new law.  “By the end of the year, everyone will be talking about 5% or so of growth thus proving that the implications of the law are not so bad. Nobody will tell us that we are having 5% instead of 10-15% of growth. The positive inertia of our economy is strong enough to leverage the consequences. But the long-term prospects are bleak. The taxation regime will impede any positive trend,” Mykhailo said. 

In particular, he mentioned the VAT for residential real estate that will slow down the construction and development sector. Agriculture will be yet another victim of the taxation regime. Small taxes will also affect SMEs and private persons. Land lots ownership and use of raw materials and utilities are examples of such small taxes that impact small-scale manufacturing and agricultural production. 

Land reform is yet another example of interference. The opponents of the reform are sure that farmers will bargain their land away. However, most of the farmers are ready to buy rather than sell. 

Promoting business activities and improving the business environment rather than increasing the tax burden is the best way to national prosperity. “Entrepreneurs and entrepreneurship must be respected. They are not cash cows. Economic and personal freedoms are should be the top priority,”  Mykhailo believes.