REUTERS
Ukraine's key creditor, the International Monetary Fund (IMF), proposes considering the possibility of introducing progressive personal income tax (PIT) as part of the tax reform instead of the existing flat tax rate.
Such recommendations are set forth in the IMF Technical Assistance Report published on the website of the organization.
The IMF recommends not "overstating the simplification benefits of a flat tax system," while keeping "a progressive structure for PIT," the report notes.
The IMF gave an example of Slovakia, which is considered the most progressive in terms of tax changes initiated in early 2000s.
"Slovakia, one of the signature flat tax countries, re-introduced a progressive income tax system in 2013. Although the flat tax was one of the measures which contributed to a strong economic performance after 2004, low levels of tax revenues and poor level of tax compliance, among other problems, led the government to discard the flat tax," the IMF noted in its report.
It is particularly noteworthy how revenues declined as a percentage of GDP, from 39.6% in 1995 to 29.6% in 2013, the IMF experts stressed.
As UNIAN reported earlier, personal income tax rates of 15% and 20%, which were applied depending on the amount of income, were effective in Ukraine until January 2016. In December 2015, the Cabinet of Ministers of Ukraine proposed, as part of the tax reform implementation, a single 18% personal income tax rate in 2016, and 17% in 2017. However, the Parliament Committee on Taxation and Customs Policy proposed reducing the base rate of income tax to 15% and personal income tax to 10%.
Eventually, in late December, the Ukrainian parliament established personal income tax at 18% in 2016.