IMF ambivalently assessed Ukraine’s tax policy

The IMF notes Ukraine has made "serious efforts" to modernize the international aspects of income tax, and to approximate to the OECD (Organization for Economic Cooperation and Development) standards. However, some circles in Ukraine "are persistently seeking to abolish the corporate income tax," the IMF stressed.

As the Fund explains, the key idea of these proposals is to introduce a tax on withdrawn capital. "In previous reports, the IMF's Department of Fiscal Affairs opposed the adoption of a withdrawn capital tax, as it would lead to significant income losses," the document said.

Instead, Ukraine has recently adopted an accelerated depreciation of fixed asset investment, being a "more targeted tax incentive" that should yield the expected results.

In addition, the Voluntary Disclosure Program (VDP) is called to be positive for tax policy. It should allow taxpayers to settle financial and physical assets for a certain amount; for assets, they have paid no income taxes.

"It will help increase the tax base, as the income received from these assets will become visible to the State Tax Service," the Fund said.

The IMF analysis, conclusions, and recommendations were compiled based on the work of the Fund's technical support mission for Ukraine, which worked with Kyiv in July this year by video conference.