Parliament approves budget-2016

UKRAINE - In Brief 25 Dec 2015 by Dmytro Boyarchuk

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MPs finally voted in budget-2016 and all supporting legislations including tax changes. The final version of budget was not released yet since many last-minute changes were introduced. However, from transcripts we know that the deficit was left unchanged UAH 83.7 billion (3.7% of GDP) as the IMF demanded. Also due to revised tax rules the targeted central budget revenues were reduced to UAH 595.1 billion or 26.3% of GDP (UAH 601.4 billion or 26.6% of GDP initially) and spending were cut to UAH 667.7 billion or 29.5% of GDP (vs. UAH 674.1 billion or 29.8% of GDP previously). Simplified tax system (the most disputable issue) was preserved and to compensate this tax relax payroll tax was slightly increased to 22% (Minfin demanded 20% initially) what is still significant reduction compared to 37% average payroll tax previously. Special taxation regime for agro-producers was significantly narrowed. On the top of that MPs voted in several really breakthrough legislations. In particular, parliament approved general application for all procurements electronic procurement system Prozorro, which proved to be extremely efficient when tested on small fraction of procurements in 2015. In addition MPs lifted bank secrecy for citizens that receive any benefits from the budget including pensions. This decision opens the way for verification of all social payments since none every really checked social funds for potential fraud. All in all it looks like we are on the right way. Preserved simplified tax system excludes possibility of large protests while preserved 3.7% of GDP deficit gives green light for further cooperation with the IMF. What more, we have a real payroll tax reform, ge...