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SME-taxation in Ukraine: Focus on abuse prevention necessary

On 3 November 2021, the German Economic Team (GET) and the Centre for Economic Strategy (CES) in Kyiv jointly hosted a hybrid expert panel on “How to limit the abuse of the simplified tax system in Ukraine?”

After an introduction by Maria Repko, Deputy Director of CES, and GET Advisor David Saha, the policy paper jointly prepared on this topic was presented by Yurii Gaidai, Senior Economist at CES.

In the joint policy paper, the authors analyse striking revenue anomalies within the groups covered by simplified taxation. Their analysis points to widespread threshold abuse in Group 2.

Therefore, they propose the following measures:

1. re-targeting Groups 1 and 2 to the smallest enterprises by significantly narrowing the list of eligible activities and adding further criteria.

2. introduction of full fiscalisation for group 3

3. introduction of compulsory VAT for retail businesses in group 3.

The proposals were intensively discussed by the expert panel.