Ukraine's vicious circle of dodging taxes

Author : Serhiy Fursa

Source : 112 Ukraine

Poor people vote for populists and block any changes that could reduce corruption, liberalize the market or make oligarchs pay taxes
08:57, 3 October 2017

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An idea that taxes should be paid provokes protest. People are surprised that when they evade taxes, they commit a crime. Ukrainians continue to live in the paradigm of a foreign state, when it is good to deceive the state. And then they just do not understand why they live so poorly.

Ukrainians like to cheat the state. They come up with thousands of reasons for this, which, in fact, are banal excuses. Bank robbers justify themselves, saying that they have taken money of the bourgeoisie that stole it from the people. People who do not want to pay taxes and argue that officials steal and oligarchs steal even more. And this gives them the right to steal as well. Is there a way out of this situation? No. It is a vicious circle. Do you think that officials have no excuse for their theft? Yes, they are the first to tell you everyone steals, so do we. And the oligarchs will say that they cannot survive without transfer pricing.

Related: “LPR” gets 47% as “taxes” from the amount of coal exported to Ukraine

And if the middle class claims that it will not pay until there are others, who do steal, then is the middle class, better? When you steal from the state, then you do not steal from the president or deputies. You steal from the taxpayers. The state does not have money, these are money of the taxpayers, who honestly pay taxes on the maintenance of the state (pension, teachers' salaries, roads). And there are people who do not pay taxes. And they do not commit a crime against oligarchs or officials. They commit a crime against their fellow citizens.

Related: Poroshenko’s confectionery company Roshen paid $4,4 million taxes to budget of Russia

There are two realities in Ukraine. First – overcrowded fashionable restaurants of cities. The second is a really high level of poverty. These two realities do not intersect. As a result, there are two parts. The first is using many opportunities in a poor country, the latter is creating this poverty. These two realities can coexist together only in connection with a high level of shadow economy. After all, the first is part of this shadow. A small part of is paying taxes. But the trouble is: tax recipients receive their funds only from the legal part. And this money is just not enough for everyone. In the end, we have a marvelous picture, when poverty coexists with lure of the restaurants and airports. As a result, Ukrainian GDP is six times less than Argentina's GDP, while electricity consumption levels of both countries are the same. The real GDP of Ukraine is much higher. But it is in shadow. And its legal part simply is not capable of supporting the state infrastructure.

Related: Poroshenko’s confectionery company Roshen paid $4,4 million taxes to budget of Russia

Yes, the difficulties of the poor are their personal problems. After all, no one forced them to become a teacher or a state employee. Each teacher can go to work as a hostess in a strip club. This judgment is almost fair, except one thing. The problems of the poor all the same become problems of the middle class. Because these poor people do not take the initiative, but they vote. And as poor people they vote for populists. And they block any changes that could reduce corruption, liberalize the market or make oligarchs pay taxes. And until you overcome this poverty, nothing will change.

Yes, offshore is a problem. And it must be solved. And it can be solved only when broadly supported political force comes to power. But inside the country a huge internal offshore has been created, which significantly affects the welfare of state-dependent citizens. A huge shadow market. And a society that believes that not paying taxes is a norm. A society that willingly receives salaries in envelopes and at the same time complains that the state does not build new schools and kindergartens. The society that believes that deputies steal, but opposes financial monitoring and control in the banks of funds. What does it mean? That every little tax evader dreams of becoming a big oligarch. He is just jealous of the oligarchs, who do not pay taxes simply because of their big business.

Related: Ukraine’s finance minister suspected in tax evasion

And yes, oligarchs or officials do not oppose the existing system. And the middle class is actively trying to overcome it. At least, in words. But in fact, it finds thousands of reasons not to pay taxes.

Is it necessary to correct the situation? Sure. But you cannot correct it while the country chooses populists. And while the middle class itself is an accomplice. Because accomplices never oppose the system, for they are a part of it.

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