×

Our award-winning reporting has moved

Context provides news and analysis on three of the world’s most critical issues:

climate change, the impact of technology on society, and inclusive economies.

Hundreds protest against Ukrainian tax reform

by Reuters
Thursday, 18 November 2010 10:53 GMT

* Small business up in arms over govt plan to end tax breaks

* Critics say new tax code favours the rich

KIEV, Nov 18 (Reuters) - About 2,000 market traders and taxi drivers protested outside Ukraine's parliament building on Thursday as deputies neared a final vote on a new tax code that critics say will drive many small entrepreneurs out of business.

Plans to reform the ex-Soviet republic's notoriously bad tax system have triggered the largest public protests against the government of Viktor Yanukovich since his election in January and galvanised the fractured political opposition.

As part of plans to rebalance the budget and satisfy creditors like the International Monetary Fund, the government wants to abandon generous tax breaks for millions of small entrepreneurs who represent Ukraine's emerging middle-class.

They include market traders, taxi drivers, cafe owners, ice-cream parlour operators and hairdressers.

The former Soviet republic needs to cut budget deficit to 3.5 percent of gross domestic product next year from this year's 5 percent under the terms if its $15 billion IMF deal.

But even the Fund has reservations about the proposed new tax code, saying that in the short term it will be "revenue neutral" -- meaning it will not immediately generate additional income for the budget.

Critics say the new tax code, likely to be approved by President Viktor Yanukovich's allies in the parliament on Thursday, offers a number of loopholes to his wealthy industrialist backers. [ID:nLDE6AF156]

Protesters outside parliament on Thursday carried signs that read "Down with the tax code". "The tax code is too much of a burden for us. If it is passed, we will die off," said one demonstrator, Hryhoriy Busol, a furniture trader.

SCUFFLES IN PARLIAMENT

Popular resentment against the tax reform plans injected the fragmented opposition with a new lease of life.

Deputies from the BYuT bloc led by Yanukovich's long-time adversary Yulia Tymoshenko scuffled with members of the ruling Regions Party in parliament and unloaded buckets of coins into the government lodge.

The Tymoshenko bloc read out an appeal from the protesters and urged Yanukovich to veto the bill even if it passed parliament.

Ukraine's current tax system is ranked the third worst in the world after Belarus and Venezuela, according to the World Bank's "Doing Business" annual survey of 183 countries.

As in many other ex-Soviet republics, businesses often choose to pay bribes instead of taxes, a practice that saves time and money but puts nothing into the national coffers.

The idea of raising taxes just a few months after a hike in gas price for households -- also required by the IMF -- has sparked protests not just in the capital city of Kiev but in other cities.

Some protesters have urged Yanukovich to veto the law if it is passed by the parliament. His office has said he would first need to study the final version of the bill. (Additional reporting by Yuri Kulikov; Writing by Olzhas Auyezov; Editing by Richard Balmforth)

Our Standards: The Thomson Reuters Trust Principles.


-->