Until recently, 314 MPs voted for the removal of this law from consideration, and the Federation of Employers of Ukraine officially expressed the hope that this bill will not be returned. However, at the height of the war between the authorities and Rinat Akhmetov, the President's Office found it hard to believe: people were being prepared for the fact that 5600 were inevitable. Today it was voted on as a whole, and the president will sign it shortly.
However, "a bill that is very useful for the state" (quote from head of the Finance Committee, Danylo Getmantsev), was nevertheless softened, apparently out of fear of a popular revolt.
Bomb on the real estate market until it explodes
The scandalous issue of paying 20% VAT on each purchase of an apartment from legal entities was removed from the bill. If this had not been done, housing could have become even more unattainable for citizens, having risen in price, according to experts, by almost a third.
The tax out of their own pockets would be paid not only by Ukrainians, who would have acquired real estate from legal entities, but also, in fact, by all other citizens, because the market would gradually catch up to new prices. Considering that in 2021 the cost of housing increased by 20-30%, the new rise in prices could be simply devastating.
However, they left a different norm for real estate. It concerns the tightening of taxation of net income from the third and each subsequent property sold during the year. An exception is the sale of inherited property.
In fact, this is a tax on wealth, because it is difficult to imagine that an ordinary Ukrainian would sell three apartments a year. "In pursuit" to it is another norm of the bill: if your car is "under" 5 years old and costs more than 40,000 USD, you will have to pay almost a thousand dollars in tax.
Yuriy Pita, President of the Association of Real Estate Specialists (Realtors) of Ukraine, reassures: there will be no critical impact on the market.
"The adoption of bill 5600 in terms of taxation of real estate will not particularly affect housing prices. This is the most deliberate version of the new taxation: personal income tax of 18% will be levied on the difference between the purchase and sale prices. Until now, the third transaction in a year has been taxed at 5%. %, but on the total amount of sales. That is, in other words, now the tax will act more precisely: its size will directly depend on the difference between buying and selling. And the greater this difference, the greater the tax. However, the new taxation will affect only 5 -7% of transactions on the market, which will not constitute a "threat" to an increase in the cost of housing," Yuri Pita comments.
There is also a more negative opinion in the expert community. Director of the Institute of Economics and Forecasting of the National Academy of Sciences of Ukraine Valeriy Geyets believes that even in this form, the bill is a serious blow to the real estate market, and the above norm will lead to an increase in real estate prices by 3-4%.
Strike against farmers
Despite the fact that 5600 is associated mainly with real estate, the bill is called an opportunity for "fair taxation of ultra-large business." Indeed, Rinat Akhmetov's business will become slightly less profitable. The budget will have to pay more - $ 60 million, but as long as the price of ore has dropped to less than $ 100, this effect will not be so severe.
Unexpectedly, there was also a rule on the taxation of manganese ore, which is now growing. Igor Kolomoisky will have to pay about 25 cents for each percent of manganese in a ton of ore mined by his enterprises.
In practice, 5600 is a bill at the forefront of which is neither real estate nor rent on ore. Prior to the second reading, it was assumed that farmers and landowners will bring to the budget almost 2.5 times more taxes than the state can receive by changing the rent model. After the second vote, the ratio, if it has changed, does not seem to be too significant.
Initially, they wanted to oblige Ukrainians, whose plots exceed 0.5 hectares, to pay the state, regardless of whether they process their share or not. Even if you own a large vegetable garden, you need to pay tax. Such is the simplest way how to return the value of land, which was once allocated as shareware in the form of shares.
By the second reading, the "vegetable garden tax" was canceled. However, 5% of the normative assessment of land, a tax of about 600 USD, which is established by this law, was left for everyone who has a share of more than these 0.5 hectares.
The second blow to farmers was inflicted by the norm of 18% of product tax (plus 1.5% of the military duty) in the amount of more than 2,600 USD per year, produced at the site. It turns out that 3,000 USD of their income is the very "super-big business"?
Ivan Tomich, President of the Association of Farmers and Private Landowners of Ukraine, emphasizes that we are talking about the category of land share owners who work independently, earn a budget for the family and provide food to the market for Ukrainians. Conventionally, if a person produces 10 tons of wheat on his 2 hectares, he falls under this category of taxation.
On the one hand, farmers will get rid of their land for next to nothing, just not to be burdened with paying taxes. Migration will grow again, which is already critical in Western Ukraine. On the other hand, the rise in prices in the consumer market of Ukraine will escalate. But the country is already experiencing an extreme shortage of animal origin, and food prices are already higher than in many other countries.
All these innovations will affect the cost of agricultural products - the tax will simply be shifted onto the shoulders of the buyer. Most significantly, in addition to grain, meat and eggs can rise in price.
In addition to the growth in the cost of food, it is worth getting ready for an increase in the price of alcohol (thanks to another provision of Law 5600 on the increase in the excise tax on alcoholic beverages). This can lead to a reduction in beer production and an increase in prices for it up to 0,2 USD per liter.
By the way, an ordinary Ukrainian will have to pay more for communication. An increase in the rent that Internet operators pay for a radio frequency resource will be included in the price of the final service for Ukrainians. In addition, this is a negative signal for investors, because mobile operators, signing a memorandum with the government, expected stability on the tax front.
Business will pay for "Big Construction" program
Another provision of the initiative introduces a ban on travel abroad for directors of small and medium-sized enterprises if their companies have at least some tax debt. Even if this debt turns out to be fictitious, the director of the enterprise will not be allowed to travel abroad. True, the norm itself is written out in such a way that businesses can simply replace managers who are not allowed to travel abroad with new, formal ones.
The fact that tax authorities can collect a tax debt using cash or funds in bank accounts without going to court suggests that the tax authorities will simply receive mechanisms for blackmailing businesses. And this, in turn, is fraught with a deterioration in the business climate and a reduction in the number of jobs, which are already in short supply during a pandemic. So both the European Business Association and the Federation of Employers of Ukraine oppose bill 5600.
Experts are confident that the proposed changes are not supported by any economic calculations and are a chaotic set of various initiatives, which means they will not bring anything good to the economy.
The samurai, as you know, has no goal, only a path. But if you are a kamikaze, there is still a goal. Prior to the second reading of Law 5600, Finance Minister Marchenko said that its implementation would allow filling the budget by an additional 1 billion USD. After the adoption of the initiative, the head of the financial committee of the Rada Getmantsev announced already about 18 billion hryvnias in revenues.
However, the goals for which the Ukrainians were going to spend taxes have not changed. The skin of the unkilled business was divided during the planning of the 2022 budget, having pledged money for:
- 432,000 USD - renovation of the railway infrastructure, construction of airports, and repair of shipping locks;
- 146,000 USD - "Big construction" and "Big restoration" in the field of culture, Ukrainian films;
- 145,000 USD - construction and repair of 200 sports facilities;
- 145,000 USD - development of medical infrastructure;
- 143,000 USD - financing of the space and aircraft industries;
- 47,000 USD - population census;
- 50,000 USD - digitalization.
Of course, the renovation of airports and the development of hospitals are extremely important. But this does not mean that the source must necessarily be the increase in taxes for businesses. Moreover, economist Mykhailo Kukhar claims that there is no need to "knock out" these funds.