Every time there is talk in Ukraine about a "fair tax system," society freezes in anticipation, and politicians in fear. Tax reform is one of those issues that has remained chronically unresolved for years. And the main reason is not a lack of bills or specialists. It lies at the very heart of the system.
In 2018, US President Donald Trump imposed protectionist tariffs on Chinese imports. In response, markets fell, and Trump's personal fortune decreased by $500 million. This is the price for a political decision in the interests of the US economy. In Ukraine, such a scenario is simply fantastic.
No Ukrainian official or MP will risk making a tax decision that will affect his business or the business of his close circle.
Here's what the current tax model looks like:
-
Export of raw materials: duties are zero (exception: scrap metal), VAT is fully refunded.
-
Imports: virtually unlimited, even in sensitive sectors where the national producer suffers.
-
Luxury: no special taxation. Luxury cars, yachts, apartment buildings — all without a "wealth tax.".
-
Rent for the use of subsoil: a meager 1.5 billion UAH per year, although we are talking about multi-billion dollar volumes of resources.
Who will win?
The beneficiaries are several financial and industrial groups that control the export of raw materials — metals, agricultural products, ores. It is estimated that since 2014, these players have withdrawn more than $50 billion from the country without creating any stabilization or reserve fund.
Their income tax is an average of 18%, while, for example, European oil giants pay 25–30%. The effect is clear: the oligarchs get richer, the budget gets poorer.
Who pays for the "banquet"?
-
Citizens - due to excise taxes, VAT increases, and general price increases.
-
Small businesses - due to constant threats of the elimination of the simplified taxation system and tax pressure.
That is, those who have neither offshore companies nor lobbyists in parliament pay the most.
The main barrier to any reform is the Verkhovna Rada. The progressive tax scale is a blow to the pockets of the deputies, ministers, and their families. That is why laws that should change the situation do not even pass the first reading.
Instead, parliament is considering changes that hit the most vulnerable: freelancers, teachers, doctors, and pensioners.
This question is often asked in society. The answer is simple: in Scandinavia, elites pay 45–60% in taxes, while in Ukraine, it is often less than a taxi driver working in the shadows.
Until the Ukrainian political elite is ready to pay for the rules it wants to set for others, tax reform will remain just a slogan. And the state budget will remain a hole that will be patched at the expense of those who already have almost nothing left.
