Ukraine is at a difficult crossroads: should taxes be raised in wartime conditions? This is a question that does not leave indifferent either businessmen or ordinary citizens. Publicist Serhii Fursa examines this problem in his article, breaking unpopular truths about taxes and their impact on the economy.
Can tax increases be avoided?
There is only one unpleasant answer to this. No. Can not.
It's unpleasant because no one likes to pay taxes. It is not at all natural to like paying taxes. And especially nobody likes when taxes go up. At least among those who actually pay them. And this is really bad for the economy. Raising taxes hurts the economy. Therefore, no matter how you look at it, raising taxes is an unpleasant and unpopular thing.
A unique situation has developed in Ukraine since the beginning of the war. Taxes have not been raised yet. At the beginning of the war, tax breaks were even made. And this happened for the first time in the history of mankind. When the country is at war, and such a large-scale war that affects your entire territory and requires mobilization, and the country does not raise taxes. It doesn't happen like that. Because war is expensive. Very expensive. And it is always accompanied by an increase in taxes. Even in Russia, the largest increase in taxes in history is now observed. Although we all used to believe that Russia has some kind of infinite resources.
But a miracle happened in Ukraine. Thanks to the money of our Western partners. And the impact on the economy was much smaller. It was depreciated. Macroeconomic stability was preserved. And people began to take it for granted. That you can have war and low inflation. That it is possible to have a war and an economy in the rear, which is almost no different from what it was before the war. That you can have a war and not have a tax increase.
The anomaly began to be perceived as the norm. And therefore, when the time came to raise taxes, society was not ready for it. Although, for example, if such steps had been taken in the first weeks of the war, they would have been received with understanding.
Why has this time come? Because war is expensive. And there is not enough money to finance the army. And our Western partners have one simple rule in their financial support. Their money goes to everything except defense funding. The entire welfare system, all the salaries of officials are all the money of our partners. Therefore, by the way, you cannot take money from an official's salary and give it to a soldier. You can't, even if it made sense. But you can't. At the beginning of the year, experiencing a shortage of ammunition, the government spent more money than budgeted for the import of weapons. And now he faced the problem that there might not be enough money even for the salaries of the military. It is unlikely that a country at war can afford this, arguing that it will hurt business in the rear. Every time at such moments you have to ask yourself, what is the business climate like in Mariupol or Bakhmut.
Is it possible to avoid raising taxes? You can often hear that there is a shadow economy, there is customs, there are many abuses in spending public money. And it's true. That's all there is. But what is missing is a magic button, by pressing which you can stop corruption or get reformed customs from September 1. Any changes that can lead to an increase in budget revenues due to the reduction of corruption should be systemic, and the result of them will be in 2-3 years. That's how it works. Unfortunately. Although I would really like to.
Does this mean that there is no need to reform the tax or customs? No. Need. Moreover, in order to increase trust between society and the government, between business and officials, the inevitable increase in taxes must be accompanied by systematic steps to reform the tax and customs, to reduce pressure on business. However, it must be understood that these steps will in no way cancel the need to find funds to finance the army here and now. It is simply necessary to demonstrate the political will for change, it is necessary to demonstrate that the blow is not only on business. And it is necessary to take those steps now that will reduce the need for additional tax increases in 2-3 years. And you don't have to invent anything. All steps have long been prescribed in the IMF program.
But raising taxes is inevitable. And the only question here is which taxes should be increased. Business was very surprised when the tax pressure on it was chosen as the basis for budget revenues, when it saw a significant increase in the military levy and, in effect, a turnover tax, instead of a simple increase in VAT. That would affect everyone, but equally. And there would not be only pressure on light business. Because the gray areas, the people from the bright and transparent part of the economy, everyone spends money. Everyone consumes. And when spending them, they pay VAT. Proportionate to own consumption. And as a result, the more you spend, the more you pay. Which is fair. But those who are already honest taxpayers will pay more military duty. Which is not very fair.
When the state asks people to tighten their belts, people should pay special attention to issues of justice. And yes, belt-tightening cannot be avoided during wartime. But you can avoid outright injustice. And the synchronization of long-overdue reforms, which should have been done 2, 5, 7, 15 years ago, and raising taxes can be a demonstration that the authorities understand the importance of justice.
