Katamadze: “There is a huge amount of money in the world. Big players don’t know where to put them. Ukraine in this sense is very interesting ”

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President of the Association of Taxpayers of Ukraine Grigol Katamadze – about the income tax and investment “nanny” in an interview to Politeka.

– Politeka: Let’s start with the initiative of the president and the prime minister – with the “nanny”, which will be presented to those who are ready to carry from $ 100 million into the Ukrainian economy.

– I took two books with me. We relate to one of them (published in 2016) – Lee Kuan Yew “From the Third World to the First” and the second book – Ehud Barak “Israeli Soldier
number one”. By the way, I recommend everyone to read this book, very interesting.

What do these books have in common? This is the story of the state creation.

After the “nanny”, different points of view appeared, opinions were divided. But I support what the president said. The methods may be different, but most importantly, the Ukrainian government does not need to comment. Because all governments is a “nanny” for investors. Especially when it $ 100 million or more. Even if it were $50 or $10 million.

And what does it mean, the government is a “nanny” for investors? The government should submit appropriate laws that will be of interest to investors, both internal and external. Moreover, the conditions should be the same. The president did not called “nanny” only for foreign investors. It was about the fact that when investing $ 100 million or more, the investor will have a person who will quickly respond to his problems and questions.

In a global sense, in order for the investor to feel comfortable in the country, it is necessary to create such a legislative base that would be interesting for investing. It should be interesting because there is a huge amount of money in the world. Big players don’t know where to put them. Ukraine is very interesting.

But, when we talk about an imperfect tax system, both legislative and the tax administration system, when we talk about an imperfect judicial system, when we talk about Corporate raiding.

(literally before the broadcast they called me, they changed the company in the registry and transferred more than 50 million hryvnas to another one) – the information available for investor. this happens in the state, which investor will bring here $ 100 million?

– Politeka: Six years have passed since the revolution. It seems they were engaged in the fight against corruption. It seems that the minister has already said that they overcame raiding by 99%, and the judicial system – it looks like plan “A”. And the “nanny” – it looks like a plan “B”: here we have failed and here, to precisely address these issues, and not make the rules of the game, you need a “nanny.” Not such a nice woman, but she’s “solver” who will guarantee this, nothing will be changed in the registry and 50 million will not go away.

No, I have different understanding. It is not a “solver”. Many reputable banks have the so-called cost-management: special private bankers who can deal with a VIP-clients for 24 hours and resolve issues . it’s nearly the same. Another thing, It may not be necessary for person to speak five languages, the main thing is that the problems which the potential investor will have, and which will be heard, the government decided realistically.

– Politeka: What are these problems? What you said is criminality, To what extent does “nanny” have to resolve such issues.

– No, when the Minister of Justice said that last year they overcame 99% raiding, let me doubt this. But even if 1%, even 0.1% – raiding should be a thing of the past and no one should ever recall this phenomenon. But if there is one such case, it can become known to potential investors and even because of this one, will not come here.

A simple example, we will not talk about Singapore or Israel. Take Slovakia, Ukraine’s neighbor. I told this example many times. Slovakia, when it carried out reforms in order to attract serious players with big money, created the appropriate conditions for this from the point of view of the legislative framework, including taxation. They created such attractive conditions that investors came. Today, Slovakia is a small country that has never produced cars, now Slovakia is the world leader in car production per capita. All the global brands have headed there.Why?

Until recently, the Ukrainian government had a strategic group of strategic advisers. One of its participants was the former Minister of Finance in Slovakia, Ivan Miklos. I well remember how at one meeting he said that when they started the reforms, they had a whole package of bills ready. Their government came to parliament, brought 200 bills and at the same time the Slovak parliament approved 199 of them. And they started reforms. not like our state.

Yes, it’s great that the current parliament adopts many interesting bills that are so necessary for the development of Ukrainian business. But this is not enough. Yes, well, that was turbo mode for quick decision making, but no system changes have occurred. In order for investors to come, they need to understand how the laws working here.

As of January 1 of the last year, companies did not pay more than UAH 200 billion of income tax from UAH 1 trillion. The Ministry of Finance itself recognized that only 10% of all registered companies pay income tax. Which means – 90% do not pay it.

We talking business, if this tax does not work, let’s replace it with another one – tax on the withdrawn capital. This does not mean to remove the tax at all, it is a deferred tax. You made a profit, you reinvested, you expanded production, hired more workers, you produce more, you do not pay tax. If you take dividends and profits, you pay the corresponding tax. And for administration even, the tax service is very easy.

But the question immediately arises from the Ministry of Finance: at least 10% today pay tax and there are revenues to the budget, and if we replace it and defer this tax with tax on the withdrawn capital, then these 10% will not be received. And they talk about different indicators: five years ago they talked about UAH 150 billion of a “hole”, they reached 23 billion.

“I know several companies that closed business in Ukraine and moved it to Georgia”

– You know, there are examples of other countries. The forums usually say that in Georgia the tax on distributed capital did not work. Absolute untruth, in Georgia that it worked.

This made it possible to develop the Georgian economy. Moreover, at the time the tax on distributed capital was adopted in 2017 in Georgia, there was the concept of micro-business, the annual turnover of which was defined as $ 100 thousand with a fixed tax rate of 5%.

They adopted the tax on distributed capital and a year and a half later, to enable the Georgian business to further develop, they raised the annual turnover to $ 200 thousand and lowered the fixed tax to 1%. See how small and medium business in Georgia is developing now! I know several companies that closed a business in Ukraine and moved it to Georgia.

If the government will work to close the business here and transfer it to Georgia, Slovakia, Poland and other countries – this is one question.that we can say the government succeeded.

– Politeka: Your opinion about five-year tax break for those investors ,who are willing to invest in privatization in Ukraine from $ 10 million.

– I agreed with those who say that there should be equal conditions for everyone. Accordingly, it will be necessary to make tax changes. But again, it will be the purest cosmetic changes in tax legislation.

For the past five years, I have been advocating the adoption of a new Tax Code, which should spell out the new rules of the game and I think that when a lot of people talk about shadows in the economy and different numbers are called from 35% to 60%, even if we take the average, it’s a big number anyway.A shadow is an absolutely adequate reaction of a business to inappropriate actions by the executive branch. This is a distrust of state institutions.

What is needed for the shadow to go away. This distrust needs to turn into trust. Business alone cannot do anything. Business has developed the rules of the game which it is ready to play by, and now the ball is on the side of state.If the state can find the strength and take a step towards business, adopt these rules of the game in the form of the Tax Code,establish a moratorium on changes in terms of changing tax rates (i.e., lower them, reduce taxes, lower rates) and at the same time declare a tax amnesty, with zero declaration – this literally in a few years will give a real result.

– Politeka: What to do these few years in the conditions of non-receipt of tax revenues to the budget?

– The philosophy of the approach, for example, of the Ministry of Finance of Georgia and Estonia is different than that of the Ministry of Finance of Ukraine.

In Ukraine, they say that there will be a “hole” if you replace the income tax with a withdrawn capital tax, and they say, look for compensators. Do you know what they say in Georgia or Estonia? That they had shortfalls in the budget. For example, Georgia received less than $ 260 million in one year. But they say that this money was invested in the small and medium business of the country. The philosophy of the approach is completely different.

We, the business, have accepted the terms of the Ukrainian Ministry of Finance. We found these compensators. Only due to the reduction in the expenses of the state apparatus they found 70 billion hryvnas.

You see, 24 billion shortfalls, and here 70 billion savings. Moreover, they did not touch the Ministry of Defense, because we understand that the country is at war. You can find many of these compensators. The most important thing is that the state thinks, because all this is one concept: both the “nanny” and the tax cut. It is impossible to achieve success, it is impossible to change anything if you make only cosmetic changes and in only one direction.

For example, an investor will bring $ 10 million, then we will give to him vacations.This approach should be for the whole business, which will be invested in the development of the country. And I think I am deeply convinced that the adoption of a tax on withdrawn capital is much more effective for the development of the country and for the development of Ukrainian business, including for potential investors, than tax holidays for 5 years.

– Politeka: For some reason, the Tax Code you are proposing is not accepted. This has been going on for several years, although the goverments had changed. It seems there is who against this, and prevent.Who are these people?

– It will be very difficult to unequivocally or one-sided answer this question.There is a lot factors.I think that it was very cool to answer this question with fresh social studies by the Kucheriv Democratic Initiatives Foundation and Razumkov Center.
It clearly says that the driver is the president. so, a few people who prevented it. Here is probably a partial answer to this question.

I think that the IMF is to some extent to slow down this. Because the IMF very often begins to offer this, at least what we know. The Ministry of Finance always justifies the impossibility of replacing the income tax with the tax on withdrawn capital precisely with the opinion and position of the IMF. Because the “hole”, because the IMF does not see balanced budget.

Not till the end, apparently, agree with the IMF. We know a lot of examples of successes that a number of countries have achieved without the IMF.

And I think that Ukraine is not exception. I do not urge cutting-off relations with the IMF. Interaction with the IMF an important role for large investors who may enter the country. But in the negotiations, you still need to insist on listening to Ukrainian proposals, which is important for our state.

For example, the IMF was categorically against the introduction of a tax on distributed capital in Estonia and Georgia. The governments of these countries nevertheless made these decisions and achieved success. You know, for the fourth year in a row we have held a large business forum. And on February 21 we will have Level Up Ukraine. At this site, we will actively insist that the state hear Ukrainian business and take a step forward.

The forum will have two sites. The first is the main panel. We want the country’s prime minister and all the leading leaders of business associations to be present on the first main panel. Each of us is trying to convey our truth. And here we wantcombine these efforts.

And the second big panel is the investment panel. Many serious players in the field of world business, the oil and gas industry, and the agricultural sector have already confirmed their participation in forum.
Because those calls, those messages that the president of the gives, they interested in.They ready to come and listen. We hope that our site will become a large business association, at which agreements will be reached to achieve success in Ukraine.

I really liked David Braun approach to world economic forum Davos: if after Davos $ 100 million comes to us, it means that we need to go to the next one, but if you don’t come, then it makes no sense to go there. Here I can not disagree.

Although those who need to go to Davos, and around the world, where they invite.., but we have The homework in our state, this is legislation in all areas: taxes, economics, finance, the judiciary. Otherwise, if the rights of owners in the country are not protected,
no investor will come. Small investors, as they came, will come. And Ukraine needs strategic investors.

We hear that this year the government has a very ambitious task. The Prime Minister announced that four thousand kilometers of roads will be made. Ukraine itself will never build roads. Ukraine, to build modern roads, need serious players and serious infusions.For this, appropriate legislation and appropriate investment protection.

– Politeka: There is conspiracy theory that the developed countries of Ukraine as a player, as a developed country industrial country need not. In principle, an agrarian appendage with cheap labor suits everyone.

– I return to these books, by the way, in none of them or in other books on reforms in different countries you will not find a list of steps that need to be taken to achieve success. If you take Singapore or Israel, there are also many players who did not see much interest in them. Each of these successful countries has its own location and understanding of this place. The leaders of these countries understood why they could be useful to the world and convinced the world, in the case of Singapore, this country is the main in the region from the point of view of the banking and financial sectors. Israel, we understand what niche it occupies. This is our task.

What they think about Ukraine, is their problem. We should not follow up on those who think that Ukraine should be a raw materials appendage. While we go on. While we are giving the opportunity to export raw materials in the form of agricultural , in the form of wood, etc. Now, when we stop talking about it and say “No,” we will build our own country, we will protect our producer, and then they will talk to us differently.

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