According to the press service of the Committee on Taxation and Customs Policy of the Verkhovna Rada, the International Monetary Fund (IMF) has recommended Ukraine suspend the Value Added Tax (VAT) and income tax reductions scheduled for 2014, the Information-Analytical Bulletin of the Cabinet of Ministers of Ukraine informs.

Experts say this proposal was expected given the situation in the world and Ukrainian economy. 

Experts note that despite criticism about VAT, revenues generated by this tax account for half of the general budget. At the same time, which is very important, more than half of the revenue is generated by importers. By cutting the VAT rate, we are actually helping importers make imports less expensive. Therefore, given a goal to reduce the overall tax burden on business, it would be more efficient and profitable for the national producers to keep VAT at its current levels. 

In most European countries, as well as in Ukraine, VAT forms half of the tax revenues to the state budget. During times of economic crisis, VAT rates are not changed. 

Criticism of VAT policy has long been based on the serious problems with the administration of this tax and delingquent VAT compensation. With the adoption of the Tax Code and launching an electronic register of tax invoices, the majority of VAT claims by business lost its relevance. 

In the first 9 months of 2013, the Treasury refunded 42.9 billion UAH of VAT, which is up 7,7 billion UAH, or 21.8% year-on-year. More than 41% of this amount was refunded automatically. This indicates that the government managed to combine the interests of the state and business in the tax area. 

Experts say VAT is applied in nearly 80 countries, almost all with developed economies. The only developed country that has no VAT is the United States. 

According to Ministry of Finances, general budget revenues amounted to 346.1 billion UAH, revenues from VAT — 138.8 billion UAH. Revenues into the general fund of state budget in 2013 from income tax are envisioned in the amount of 55.4 billion UAH.

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