Analysts have noted a worrying trend in Ukraine’s business landscape — an increase in the number of business closures due to rising taxes. However, Member of Parliament Andriy Hetmancev sees this as an opportunity for self-employed individuals to thrive.
According to recent data from the State Fiscal Service of Ukraine, the number of business closures has increased by 15% in the first quarter of 2021 compared to the same period last year. This trend has been attributed to the government’s decision to raise taxes in order to cover budget deficits caused by the COVID-19 pandemic.
The increase in taxes has been felt by businesses of all sizes, from small startups to large corporations. Many business owners have expressed their concerns about the impact of these tax hikes on their operations and profitability. Some have even been forced to shut down their businesses as they can no longer afford to operate under the new tax regime.
However, MP Hetmancev, who is also a successful entrepreneur himself, sees a silver lining in this situation. In a recent interview, he stated that the increase in taxes could actually be a positive development for self-employed individuals, or «FOPs» (sole proprietors) as they are known in Ukraine.
Hetmancev believes that the rise in taxes will encourage more people to register as FOPs and start their own businesses. He argues that the current tax system in Ukraine is more favorable for FOPs compared to other forms of business, such as LLCs or joint-stock companies. FOPs are subject to a simplified tax regime, which means they pay a flat tax rate of 5% on their income, regardless of the amount. In contrast, LLCs and joint-stock companies are subject to a progressive tax system, where the tax rate increases as their profits grow.
The MP also pointed out that FOPs have more flexibility in terms of tax deductions and can claim expenses related to their business activities, such as office rent, equipment, and transportation costs. This, according to Hetmancev, makes it easier for FOPs to manage their tax burden and remain profitable, even in the face of rising taxes.
Hetmancev’s views have been met with mixed reactions from the business community. While some have welcomed his optimism and see it as a potential lifeline for struggling businesses, others have criticized his statements as being out of touch with the reality on the ground.
One of the main concerns raised by critics is that the increase in taxes will not only affect businesses but also consumers. As businesses pass on the additional costs to their customers, the prices of goods and services are expected to rise, making it harder for people to make ends meet. This, in turn, could lead to a decrease in consumer spending, which would have a negative impact on the economy.
Moreover, some experts argue that the rise in taxes will not necessarily lead to an increase in the number of FOPs. They point out that starting a business requires more than just a favorable tax regime. Other factors, such as access to financing, market demand, and business skills, also play a crucial role in the success of a business.
Despite the differing opinions, one thing is clear — the increase in taxes has put a strain on businesses in Ukraine. The government is facing pressure to find a balance between generating revenue and supporting the struggling economy. In the meantime, businesses will have to adapt to the new tax reality and find ways to remain competitive.
In conclusion, while the rise in taxes has undoubtedly caused difficulties for businesses in Ukraine, it has also sparked a debate on the country’s tax system and its impact on entrepreneurship. MP Hetmancev’s views may not be shared by all, but they have shed light on the potential opportunities for FOPs in this challenging economic climate. Only time will tell if his predictions will come true, but one thing is for sure — the business landscape in Ukraine is constantly evolving, and entrepreneurs must be ready to adapt to survive.
