IMF recommends postponing scheduled tax cuts in Ukraine

Макроэкономика 29.10.2013 The IMF recommended on October 28 that the Ukrainian government postpone cuts to the value-added tax and enterprise profit tax that were scheduled for 2014, according to the press-service of the Verkhovna Rada, Ukraine’s parliament. Earlier this month, Revenue and Duties Minister Oleksandr Klymenko said the government is considering a postponement, citing the IMF recommendation. Alexander Paraschiy: The IMF recommendation is very beneficial for the authorities, at the moment. The president’s promised tax cuts that are stipulated by a new tax code (VAT to 17% from 20% starting January 2014, enterprise profit tax to 16% from 19%) would reduce state revenue by about UAH 25 bln, according to Klymenko, a prospect that has disturbed authorities who are already facing problems with collections. Against this backdrop, the authorities can use the IMF statement to avoid implementing the president’s pledges. Still, we can hardly expect compliance with the full package of IMF recommendations – which include higher utility tariffs and liberalized ForEx policy – to go beyond postponing tax cuts.