Red and sour
What is the difference between e-declaration and the universal declaration of income?
The shocking welfare of MPs and officials in starving country, which is waging the war, caused an obvious reaction in Ukrainian society.
Ukrainians do not select words during commenting piles of cash money, dozens of apartments and houses. Total sum of money, which was declared by officials, amounts to more than UAH 12 billion. 409 “MPs” own 4042 objects of property. It only comes about declared objects (!). There is an understandable shock not only among the residents of the country, where minimum wage increases up to $ 120 is only being discussed, but also among the whole world.
In response, MPs started to talk about the implementation of the universal declaration of incomes. Frankly speaking, it seems to be infantile. It looks like behaviour of naughty children: if we, they will.
In addition, the MPs has admitted again their theft and greed, lack of still small voice, but also flagrant incompetence.
People, who are writing laws for us, do not have any idea about the basic principles of functioning of the state system. In general, it is not a secret, as well as their bags of money.
The country just obtained an evidence of MP’s greed. After that, it obtained MP’s stupidity. Here is a séance of serial self-exposure in order to deny all illusions.
Elimination of illiteracy (likbez) for populists: what the universal declaration of income is?
Only a complete ignoramus can put e-declaration and the universal declaration of income in one logical row. Putting these two things in line is similar to considering red and sour to be the phenomena with the same nature. Or to believe that a conservatory is the place, where conserve (canned goods) are stored.
Electronic declaration and the universal declaration of income – are tools. The purposes of these tools are different.
I do not even hope that MPs will be able to understand all the following thins. Therefore, I would like to address the text to Ukrainian citizens, who again can be misloaded.
Electronic declaration of assets of public servants, the very e-declarations, – is an anti-corruption instrument. That is why, the appropriate anti-corruption government agency, namely, NAPC (National Agency for Prevention of Corruption) deals with it.
MPs and other public servants are submitting the declarations. Concealment of information about property, assets and income shall be punishable by large fine or imprisonment for a term of two years. The first act, which we all can observe, fixes the status quo.
In future, during the submitting of the following declarations, NAPC will be obliged to carry out the monitor. If the property of public servant, including the MPs, grows disproportionally to his income, the agency has to carry out an inspection of corruption. Will it carry out such inspections or is it able to do it – is another matter.
At the same time, the universal declaration of income – is a TAX instrument. Its function – is to facilitate the correct and accurate payment of taxes by all taxpayers.
These two things cannot be compared or put in one row.
I will explain it easily. If the e-tax declarations were tax documents, the NAPC would not deal with it. The fiscal service would do it. The tax servants would have to calculate the difference between revenues and expenditures, and demand paying income tax on this odd from each declarant.
NAPC will not do this. There are some timid statements about the fact that the prosecutor’s office will apply to the State Fiscal Service with a request for payment of taxed by declarants. However, we clearly see, what is going on with the fiscal service. There’s simply no people (!), who can deal with such inspection.
The universal declaration of income as a tool of removal salaries out of the “shadow”
It is interesting that nowadays, the idea of the universal declaration of income is accelerated by those politicians, who in 2013 accused me in the fact that «Klymenko wants to get into the pocket of every Ukrainian”. Let me recall, in 2012-2013 me and my team of the Ministry of revenue and duties, consultants from PwC were working out an idea of universal declaration of income as a part of general reform of tax administration on income of individuals. As well as a part of tax reform in the country, where economic indicators were growing, business was developing. No one could even imagine that after in a year or two, the country would be at war due to whims of populists, who crave for power.
That time, we considered the universal declaration to be a strong incentive to remove wages and income out of the shadows. I have always been a principled opponent of shadow employment, because salary in an envelope – it is disempowerment of the employee and a complete lack of social protection. If a person agrees to “grey” wages, he robs himself and loses a part of future pension at least. However, fight against envelopes must be carried out steadily on the background of economic growth, cost of living, creating new workplaces, not during the times, when both employers and employees can barely make ends meet.
By the end of 2012, tax declarations have been filed by 2% of Ukrainian citizens, 600 thousand people. It comes about public servants, as well as people, who had more than one job or another source of income. We were working hard in order to make people voluntarily declare their income and pay taxes. In order to form the understanding in society that paying taxes – is a personal contribution of each person to their own state. In order to affirm that each person can demand appropriate quality of services from the state.
It was planned to include two synchronous innovations during the following stage of the reform related to taxation of income of individuals.
The first one – is expansion of the circle of persons, who are obliged to submit an annual declaration of income: people with income above the 120 times minimum wages, people with assets, which worth more than 1200 times the minimum wage, and people with financial liabilities more than 120 times minimum wages. According to preliminary data, it comes about 3 million people.
All the talks about the fact that it is possible to make all 22 million citizens, who receive official salaries, to declare their incomes, – is nonsense (sorry for the rudeness). Even if it is possible to do it physically, the state simply does not have possibilities to process and check these declarations.
Just have a look. The NAPC system “laid down” after submitting of 100 thousand e-declarations. The Agency prefers not to tell (even not to think) about the time, when this information will be processed and inspections will be held.
The second one (at the same time!) – is reducing the tax burden on wages, i.e. income tax and unified social contribution. Calculations on mathematical models demonstrated: tax reduction will not lead to decrease in revenues of state and local budgets, if it takes place together with removal of incomes out of the “shadow”.
On the contrary, introduction of transparent and loyal rules of tax administration will lay the foundation for the growth of revenues. Moreover, we will obtain social effect: protection of the employee before the employer.
As a result, it was planned to move to the universal declaration of income by citizens in 10 years, as it is made in plethora civilized countries. The most famous instance – is the United States.
Tax amnesty VS One-off Declaration
One time we thought about the tax amnesty, but we dismissed this idea. It has not worked neither in Georgia, nor in Italy, nor in other countries, where it was introduced.
We were considering the format of one-off declaration for citizens, namely, claim of property, funds, financial liabilities by the beginning of reported period. This form would be submitted once – during the first year of the beginning of the declaration. We were planning that each person would declare its property. This fact will become a reference point for future relations with tax authorities.
Tax service takes a one-off declaration on trust and checks the growth of incomes, property and paid taxes in a year. In case of non-providing of the one-off declaration by the beginning of the reported period, the property, funds and financial liabilities will not be taken into account during the applying of the method of matching the revenues and expenses in future periods.
Under current circumstances, this mechanism definitely will not work. There is nothing to discuss, when trust in authorities and the state is actually null.
There were an attempts to introduce an analogue of the amnesty of capital for business in 2014. Do you remember, how did “experts” from the State Fiscal Service widely promote some tax compromise in 2014? It led to usual extortion of money from business. As a result, those people, who submitted revised declarations that time, came under repression and were not happy that they had believed the state.
Should we introduce the universal declarations now?
Firstly, the State Fiscal Service will not withstand of such tension after the leadership of “reformers”. There is no analytical basis and specialists, who are able to process such array of information usefully. There is no trust in neither tax service, nor the state.
Secondly, it does not make sense in an impoverished country. It will not provide the growth of tax revenues. We will put a lot effort and state funds in order to confirm an obvious thing: people are poor and survive for a penny. Everyone knows it.
If everyone shows real incomes, the majority of Ukrainians will become unconscious “criminals” due to purchase a refrigerator for its real price.
A logical step after the publication of e-declaration is a luxury tax. Trillions in cash and dozens of apartments, villas, collections of paintings and coins are clearly not essential goods. It is a luxury.
It should be taxed. Even taxation of the declared funds of MPs at the level of 5% will bring additional UAH 600 million to the budget. Only after that we can talk about the expansion of the list of declarants.