Ukrainian senior MP warns new tax hikes will cause a drop in tax revenues

Source: Nina Yuzhanina

Senior Ukrainian MPs Nina Yuzhanina warned on Wednesday the new tax hikes for businesses proposed by the Ukrainian goverment earlier this month can see the country ending up a ‘tax trap’.

She claimes that “the government’s desire to increase budget revenues by raising the tax burden on businesses results in suppressed and reduced entrepreneurial activity, which in turn wil lead to lower tax revenues. This is the ‘tax trap.”

This aligns with the “Laffer Curve” situation where tax revenue begins to fall after a specific tax rate.

Yuzhanina believes that tax revenues will climb past the maximum rate point soon after Bill No. 11416 on tax hikes is adopted.

“Even today .. we see a rise in demand for cars (the sales tax  on a new car will increase  by 15%  once the law is passed) and we will see market stagnation, reduced fuel consumption,  and a decline in the sales of all goods and services,” explained Yuzhanina, arguing Ukraine’s goverment is failing to see that it can prompt the growth of grey market in Ukraine.