The introduction of a 50% tax on the profits of banks in Ukraine for the second year in a row contradicts the nature of the tax on excess profits, it undermines trust in politics and is not an effective solution, according to the deputy head of the International Monetary Fund (IMF) mission in Ukraine, Trevor Lessard.
"Windfall taxes are only applied for one year: you pay a political price for raising taxes, you get a lot of resistance... If you introduce a windfall tax more than once, then people will start to react and you will start to lose credibility in the policy." said the deputy head of the mission in an interview with the agency Interfax-Ukraine in Washington.
According to him, after the re-introduction of 50% income tax, banks may change their profit policy in anticipation of another such increase.
"It is very rational for them to prepare for the third time, because there is a possibility that it will happen again", - added Lessard.
He noted that Ukraine's need for domestic revenues has been consistently high for many years. And taking into account the overcoming of political difficulties connected with the support in the Verkhovna Rada of initiatives to raise taxes, "the best choice would be to raise taxes in a long-term, effective way that pays you dividends in the medium term, as opposed to a one-off tax hike that still leaves a revenue gap next year."
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