These will include hotels and baby food producers. According to the Ministry’s press service, the initiative is based on the fact that the tax privileges “have not created a favourable environment for financial stabilization of the given industries, while leading to lower revenues to the budget and tax evasion.” The analysis of 2012 performance in industries entitled to privileges revealed the decline of output, hence the need “to cut preferences that have not facilitated the development.”
The next wave of tax privilege cuts is scheduled for 2016-2021. It will cover film industry, hotels and coalbed methane producers. As a result, extraction companies will cut investment into exploration, says Leonid Rubanenko, President of the Tax Advisors Union. In hotel business, the change will hit big hotels the hardest, says Roman Ponomarenko, Vice President of the Small Hotel and Apartment Association. Currently, only 1% of 8,000 small hotels and hostels use the privileges.
Financial transactions will see important changes as well. The legislature is expected to give legal definition to REPOs for taxation purposes. Should the title to securities not be passed to the buyer on the start leg and the counterparty default on the close leg, securities will be retrieved (alienated in Ukrainian legal language) on a compulsory basis. Other amendments will include a revised mechanism of excise duty (known as special tax in Ukrainian legal language) payment by brokers-dealers, a shift of the date of tax incurrence from the date when income is received to the day of title transfer or closure of a deal.
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