Simplified taxation was implemented in 1998, and was not reformed afterwards. The common feature of "simplified" taxes is that they are substitutes for several types of taxes, as well as social insurance contributions. However, current system of social insurance, developed in 1998-2001, does not take into account the specifics introduced by simplified taxation schemes.
Taxpayers who opted to simplified taxation schemes do not contribute to pension fund sufficient amounts for being eligible for pension benefits. However, according to legislation, they will be eligible for receiving social pensions paid currently from the State Budget. This situation raises two issues:
- redistribution effect from people who uses general taxation schemes;
- uneven burden of payroll taxation.
Even though the fractions of taxes paid by taxpayers that use simplified taxation scheme for them and for their employees are transferred to several social insurance funds and pension fund, they are not personalised. Besides, there is no clear procedure, how these people can obtain benefits from the Insurance Funds they pay contributions to. Therefore, in practice, these taxpayers and their employees remain socially unprotected.
Content
- Introduction
- Social security system in Ukraine
- Simplified taxation in Ukraine
- The social and pension insurance legislation vs. simplified taxation in Ukraine
- Policy recommendations
