In Ukraine, the possibility of introducing the Polish model of taxation of FOPs is being considered. About this in one of interview said Danylo Hetmantsev, head of the Committee on Finance, Tax and Customs Policy of the Verkhovna Rada of Ukraine.
According to him, the IMF requires changes to the single tax paid by entrepreneurs on the simplified taxation system.
The innovation is allegedly designed to make it impossible for large and medium-sized businesses to use this system to avoid taxation. Edition Фокус it was discussed how the Polish system is better for small business, whether it will really help to prevent the abuse of big business in Ukraine, and what consequences a hasty calculation of the tax model of a neighboring country may lead to.
There are currently two taxation systems in Ukraine: general and simplified. "Generals" pay personal income tax, VAT, EUV and military levy. FPOs often choose a simplified taxation system if their annual income does not exceed:
UAH 1 — for the 118st group;
UAH 5 — for the II group;
UAH 7 — for the III group.
In addition to income, the number of employees is important for being in this or that group. At the same time, there is a list of activities that are completely or partially prohibited for "simpletons" or are possible only for certain groups.
As a rule, the XNUMXst group includes entrepreneurs who provide household services to the population or trade from trays.
On II - those who are engaged in production, processing, wholesale trade, provision of transportation services, temporary accommodation, etc.
The III group is chosen by agricultural producers, construction, furniture business, entrepreneurs providing services for vehicle repair, wholesalers, hotel and restaurant business, etc.
Unlike entrepreneurs on the general taxation system, FOEs on the simplified system pay a single tax, the rates of which for the first two groups are set by local authorities within the limits of:
for group I — no more than 10% of the subsistence minimum (as of January 1.01.2023, 268,4 — UAH XNUMX);
for the II group — no more than 20% of the minimum wage (6700 hryvnias on January 1.01.2023, 1340 — XNUMX hryvnias).
The following rates are provided for entrepreneurs in the III group:
1) 3% of income — for VAT payers;
2) 5% of income — if VAT is included in the single tax.
Complaints about "simplification" in Ukraine are often related to the fact that a large business, in order to avoid paying income tax and other payments that must be paid by legal entities, divides its activities into 5-10 or more FOPs. That is why some restaurant chains can have different FOPs on the receipts - one FOP on the alcohol check, another on the meal receipt, and a third on the delivery receipt.
What is the Polish model of taxation of FOP
In Poland, as in Ukraine, along with the system of taxation on a general basis (that is, payment of income tax at a progressive rate), there are two more systems of taxation — the linear and the simplified system of taxation, said the executive director of the Union of Ukrainian Entrepreneurs (SUP), Kateryna Glazkova.
"The simplified one is particularly popular among Polish entrepreneurs. On this taxation system, the tax rate can vary from 2 to 20% and depends on the type of economic activity", the expert explained. Yes, lower rates for entrepreneurs engaged in production and trade, higher rates for service providers.
3% — for public catering services (without sale of alcohol), sale of food products;
5,5% — for construction works, freight transportation;
8,5% — for catering, alcohol trade;
17% — for individual activities (without employees) of notaries, lawyers, independent consultants;
20% for other services.
The Polish model of taxation gives the "simplified" a higher income limit than in Ukraine for the third group — 2 million euros.
"As in Ukraine, entrepreneurs can choose: to work at a fixed rate, which is applied to all income, without the possibility (and need) to deduct their expenses. This simplifies accounting. But in Poland, the rates are differentiated by type of activity, which makes it possible to take into account different margins, different share of overhead costs, riskiness of activity and stimulate certain directions." - noted Yurii Gaidai, senior economist of the Center for Economic Strategy.
What can copy the Polish model lead to
First of all, experts draw attention to the fact that the Polish model involves accounting, while the Ukrainian "simplified" model is based on the cash method of income calculation, commented tax expert Oleksandra Tomashevska.
The reform will introduce accounting, which means increased audits and costs for small businesses
"The main principle of the Polish tax system is that it is accounting of income and expenses according to documents. All the rates listed are not flat tax rates like ours, but a reduced rate of Polish VAT. Describing the Polish model, experts lump together both VAT and personal income tax. The 17% rate is the personal income tax rate, but if such a person provides services, he will additionally pay VAT depending on the type of activity. Unlike the Polish system, the Ukrainian simplified system provides for the cash method of calculating income: if the money comes to the account or to the cash register, there is income, if it does not come, there is no income. This approach is very convenient for our entrepreneurs, because it does not require either record keeping or document storage", — Tomashevska explained.
The introduction of accounting for micro-businesses in Ukraine "will create reasons for inspections, this is an unnecessary burden on micro-businesses", convinced CASE-Ukraine senior economist Volodymyr Dubrovskyi.
"If in Ukraine there will be different rates for different types of activities, this will mean the need to check what kind of activity the FOP is engaged in. An excuse for checks and games: to pretend that you are engaged in a less taxed activity, while in fact you are engaged in a more taxed one. There will always be room for something to pick on, because there are many types of activities on the border." said Dubrovsky.
The Polish tax system is more complicated for the FOPs themselves, which provide services in different categories, which are taxed at different rates, because the entrepreneur will need to spend more resources on keeping records, Glazkova added.
The introduction of the Polish model of taxation in Ukraine could theoretically help increase revenues to the budget, which we badly need. After all, it means an increase in tax rates for certain types of businesses. For example, for IT users who often choose the III group and pay 5% EP (from April 22 until the end of the grace period they could pay 2%).
"Incomes of IT specialists in Poland are taxed at a rate of 8%. At the same time, in Ukraine — 3-5%. That is, by adopting the Polish approach to taxation and increasing the taxation of incomes of IT specialists, we can achieve the opposite effect — not only a large part of the IT sphere, but the entire market of services, which was on a simplistic basis, may go into the shadows", — warned Glazkova and added: — Instead, the introduction of lower taxes on the sale of goods will not provide the necessary revenues to the budget. That is, instead of increasing tax revenues, due to a change in the system, we can get greater "shading" of the economy. At the same time, the share of abuse of the "simplification" is not as critical as the risks for the Ukrainian business environment due to the transfer of the Polish model."
"According to our data, the scale of these abuses is exaggerated. For example, they say that they are evading the payment of personal income tax and social security tax by passing off employees as self-employed workers. There is such a phenomenon. Before the war, it was 43 thousand out of more than 500 thousand of those who used the III group. The total damage to the budget from these abuses amounted to UAH 12 billion." Dubrovsky noted. However, it is not worth destroying the "simplification" for IT, which "gives us some perspective and enables Ukraine to retain talent," he added.
In addition, it is not clear how exactly different rates and/or an increase in the turnover limit for a single tax will help to distinguish between small, medium and large businesses in order to fight against schemes, Ivan Oskolkov, attorney of the legal practice of JSC AVER LEX, drew attention.
Instead, CASE Ukraine proposes to introduce a "moderate" tax for taxi drivers and craftsmen, 96% of whom are in the shadows, "which would allow them to work legally, paying a small amount of money," which would bring the same 10 billion UAH to the budget. In addition, in order to combat schemes, it would be enough to check specific offending firms more carefully, rather than changing the rules of the game for everyone.
"The best thing that could be done with our simplified system is to touch it as little as possible." — thinks Dubrovsky.
Is it necessary to change the Ukrainian "simplified"
Changes to the Ukrainian "simplified" should be approached in a balanced way, experts say.
"Our "simplified" developed precisely because it was the most liberal in Europe. IT specialists, auditors, and lawyers work excellently on it. Our "simplified" I-III group is the best in Europe." - said Oleg Hetman, coordinator of expert groups of the Economic Expert Platform.
Abandoning the model will lead to Ukraine's loss of competitive advantages over its neighbor, according to the interviewed experts.
"If we have a model like the one in Poland, who will we have left if there is no advantage to continue doing business in Ukraine? Taking into account lower loan rates, state support at the initial stages, a more transparent regulatory system, courts that make decisions in accordance with current legislation and not other factors [in Poland], the one and only advantage of a Ukrainian enterprise is a lower level of taxation. People who are abroad will ask: why should I return? — commented Ilya Neskhodovskyi, head of the ANTS network's analytical department.
In general, borrowing the best practices of the taxation systems of European countries in the post-war period can have a positive effect on both small businesses and the country's economy. "But such an implementation must take into account many components, — says Andriy Shabelnikov, managing partner of JSC EvrikaLaw. — First of all, this concerns the openness and transparency of domestic tax legislation, which has long been in need of qualitative changes. The principles of social justice and proper tax control must be observed."
Improvement of the "simplified" can take place only after the war, the interviewed experts emphasize. The Verkhovna Rada agrees with this.
«The issue of the small business taxation model is currently only being discussed at the level of the CMU. The Polish model is only one of ten models under consideration. There will definitely be no changes during wartime", - assured Danylo Hetmantsev.
The "simplified" reform should not be limited to the differentiation of rates or the increase of limits — it should be accompanied by a set of changes.
"We need to figure out: what exactly are the shortcomings, analyze the issues, international experience, alternatives, taking into account Ukrainian specifics, then draw conclusions - recommendations for Ukraine. Then it will be possible to suggest improvements." Hetman emphasized.
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