Ukraine’s Parliament Approved Changes to Tax Code

Ukraine’s parliament approved tax- code changes proposed by President Viktor Yanukovych to end two weeks of protests by small-business owners and allow for the 2011 state budget to be adopted by Dec. 20.

The amendment was backed by 268 lawmakers in the 450-seat legislature in Kiev today. The new law eliminates changes to the tax system for small businesses that were approved on Nov. 18.

“The president suggested we keep the simplified tax system for small entrepreneurs unchanged” when the new code takes the effect, Vitaliy Khomutynnik, the head of tax and customs policies committee, told lawmakers. Yanukovych wants a special group that will include small entrepreneurs to work out a new tax law over two months, Khomutynnik said.

Parliament must adopt the 2011 budget before Dec. 20 in order for the country to receive the next installment of its bailout loan from the International Monetary Fund. Ukraine pledged to narrow next year’s budget deficit to 3.5 percent of economic output from 5.5 percent in 2010 to qualify for a $1.6 billion tranche, which the Washington-based lender’s board is scheduled to vote on releasing by the end of the year.

A new tax code was approved last month that the government said was designed to crack down on the gray economy and increase budget revenue after gross domestic product plunged 15.1 percent last year. The code lowered the corporate income tax rate by 2 percentage points a year through 2014, while limiting the number of self-employed people who qualify for a flat income tax. The law sparked protests by thousands of people and Yanukovych subsequently demanded changes the code.

Thousands of self-employed workers, who make up 19 percent of Ukraine’s workforce, staged rallies starting Nov. 16, enduring rain and snow to argue that the legislation would raise taxes for them and give breaks to the rich.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net.

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