The results of recent surveys of companies confirm the great problem taxation presents to all sizes of enterprises. The different presumptive taxes introduced in 1998 for small and medium sized enterprises (SME) have contributed to an amelioration of the situation. They also seem to have been "productive" from a fiscal point of view. Nevertheless, a reform of the presumptive tax regulations appears necessary, primarily to improve transparency, to treat all enterprises equally and to stabilise the social insurance system. Our reform proposals for the presumptive tax are:
- Reduction of the number of presumptive taxes to possibly only two: (a) a presumptive tax for "market stalls" (a definition of these market stalls should be arrived at jointly by the central government, the oblasts and tax department. Such "market stalls" would be freed from the obligation of bookkeeping), and (b) a presumptive tax for all other small enterprises (with an obligation to present an accounting for surplus revenue and gross income).
- No introduction of locally defined "unit incomes", but retention of the present gross income limits (of UAH 0.5 m for natural persons and UAH 1.0 m for judicial persons). Alternately, by combining these limits into one average value the system could be further simplified.
- Indexing of the upper gross income limits to the rate of inflation.
- Inclusion of all taxes and fees into the presumptive tax with the exception of VAT and social security contributions.
- Sharing of the presumptive tax revenues with the lower levels of government.
