№3(14)(2013)

Project of Law of Ukraine "On Amendments to the Tax Code of Ukraine to determine list of tax differences" and the Concept of amendments to provisions of Chapter III of the Tax Code has been subject of active discussion in business environment. Experts of Academy of financial management together with specialists of the Ministry of Finance and activists of the Ukrainian Union of Industrialists and Entrepreneurs March 12, 2013 held round table on this issue. Panelists were nearly 70 representatives of commercial organizations, business associations, government bodies, ministries, research institutions.

First Vice President of UUIE Sergei Prokhorov called the most important moment of meeting that business can demonstrate its power position. He welcomed initiative from the Finance Ministry, which has expressed its willingness to dialogue with business environment. "We must form a unified position, so business should make their considerate and thoughtful suggestions and justify them" - said Sergey Prokhorov, promising that to account structural reasons, they will be collected and summarized, in future, on regulatory level to create favorable conditions for business.

According to Sergei Prokhorov, amendments to the Tax Code determining list of tax differences will help simplify doing business in Ukraine for domestic enterprises and foreign investors. "The law, which is now actively discussed in business environment, designed to reduce differences between accounting and taxation, to make procedure as transparent as possible. Its passage would improve investment attractiveness of country as a whole and make our economy more understandable for foreign investors because it offered to allow large corporations to attribute warranty expenditures to cost, and small and medium enterprises - simplify record keeping and reduce accounting burden" - said the first deputy of UUIE President.

"The current system of accounting taxation in Ukraine provides only 10% of investment as costs and remaining 90% must be amortized over next years. In this case, will investor be interested to make his investments and repair Ukrainian enterprises, if understands that he can put only 10% to costs and remaining amount will be amortized over next years? That is direct threat to investment attractiveness"- says Sergey Prokhorov. Therefore, he said, domestic and foreign investors supported need for changes in tax law in determining list of tax differences.

Developers’ leader of the law "On amendments to the Tax Code of Ukraine to determine list of tax differences", Deputy Director of the Financial Research Institute of the Academy of Financial Management, Doctor of Economic Sciences Ludmila Lowinska said that such model to determine income tax and list of tax differences actually was described in 2010, when developing third part of the Tax Code, but not understood at the time. She briefed audience with global practices and approaches to object of taxation definition on income tax using indicators of financial statements.

Deputy Director of FRI told about two options to correct profit in financial reports that exist in world, adding that she personally is a supporter of both options. However, based on thesis that we should borrow the best, not worst, Lyudmila Lowinska is sure that it would be reasonable to introduce model, when taxation object is determined by adjusting financial result with tax differences in income and expenditure. Since in Ukraine taxpayers of income tax are not only corporations, for which in world in determining object of income tax adjustment for financial gain on defined income and expense are used more widely, but also small and medium businesses, then was chosen more attractive tax differences methodology because of easier administration and cheaper version of tax defining.

Ludmila Lowinska reported that the Academy of financial management over past year has held series of seminars in Ukraine to discuss mechanism of tax differences and tested such mechanism in large enterprises. It turned out that for particular company the maximum amount of tax differences will be four or six from total number of all possible. Among tasks that were assigned to law developers, she named maintaining fiscal component, to not decrease revenues and preserve agreements that exist at the present day between government and business. According to Deputy Director of FRI, vast majority of tax differences is the result of agreement between authorities and business.

Manage of Audit Company BDO LLC Sergey Rohoznyy thanked project developers, adding that much has been done. This is positive step for taxation of certain areas and operations. However, like any job, law needs to be adjusted. Thus Sergei Rohoznyy proposed to discuss few moments. Specifically, in his opinion, they should review provisions relating to prohibition on inclusion in total costs the  business expenses for social services, in respect of financial costs from non-residents’ loans, exclusion procedure for collateral property, accounting of securities transactions, calculation of vacation reserves. He proposed to amend certain articles of law project in order to improve it.

Sergei Rohoznyy position was supported by Vitaly Sheremet from "Deloitte & Touche USC", noting that he, as an expert, believes that idea of ​​introducing tax differences is relevant. He drew attention to the fact that you must also decide which standard to work with in order to have no variation. "Today we do not have tax consolidation, and this creates flow of financial resources for optimization of tax payments. Therefore, in my opinion, before adoption of this law, rules on tax consolidation should be passed", - said Vitaly Sheremet and asked to assemble a working group to finalize law, which would include both business community and government bodies, including the Ministry of Finance .

Rector of the International Academy of Finance and Investment, Igor Podoliev, generally positively evaluated the law, calling the work very rewarding and one that inspires confidence. "We do not want to destroy state system of relationships with business, but make it more stimulating" - said the speaker. Igor Podoliev also drew attention to the need to develop implementing structure for the law and creating for this purpose "like-minded community", since there always are regulations on the way of document implementation that may unintentionally distort document essence. He also called for development of clear definition of permanent and temporary tax differences, to extent possible to exclude these ambiguous terms.

Chairman of the UUIE Economic Policy Commission, Yulia Drogovoz, expressed entrepreneurs wishes to postpone norms of current version of the Tax Code of Ukraine regarding reporting on tax differences, if proposed bill will not be adopted this year. After introducing tax differences from beginning of year, there are currently not provided with appropriate mechanisms of requirements to identify and account for such differences, their fixation in financial statements. Today also there is no method of accounting temporary and permanent differences, which makes it impossible to fulfill relevant requirements of the Tax Code of Ukraine. She expressed gratitude for the fact that project is considered together with entrepreneurs and they can join in debate to voice their opinion.

Discussion of law by panelists concluded that adoption of the law shall significantly simplify tax accounting, make it more transparent and reasonable, and have positive impact on Ukrainian investment climate. Summing up the discussion, Lyudmila Lowinska stressed that she is very glad that now idea of ​​approximation of tax legislation to methodological principles of accounting finally won. She drew attention to another aspect of work on the law, including fact that changes in the Tax Code of Ukraine entail transformation in other legislation. For example, needs of substantial revision of law on accounting, on auditing, Ukrainian translation of International Financial Reporting Standards and related regulations.

Roundtable participants agreed that law project "On amendments to the Tax Code of Ukraine to determine list of tax differences" needs improvement. They supported proposal to introduce provisions of the law to as more businesses and within a few weeks to get their comments. Moreover, proposal to create working group was positively greeted, it would systematize statements regarding business environment of project and take them into account in further work on document.