"We cannot simply raise taxes in Ukraine if all our neighbors are in much better economic conditions. We will simply lose the competition with them and "fail" the main export industry."

This opinion was expressed by Dmytro Kokhan, Deputy Chairman of the Ukrainian Agri Council (UAC), commenting on the possible abolition of the simplified taxation system by the authorities to expand budget revenues.

He emphasized the indicator of profitability of agricultural production, according to which in 2023 the vast majority of vestures were unprofitable. In such circumstances, it simply makes no sense for the state to transfer taxpayers of the single tax of the 4th group o to the general taxation system, which is based on the profit earned.

If, for example, they are transferred to the general system today, farmers will simply report losses incurred in 2023 and will not pay any taxes at all. Instead, being in the 4th group of the simplified taxation system, they will in any case pay a fixed tax, which the state can take into account when planning future budget expenditures.

The expert notes that from a state's point of view, a warring state should raise taxes to support the front line. However, it is illogical to transfer an unprofitable industry to the general taxation system, because then no one will pay income tax - there will simply be nothing to collect the tax from.

The main problem in regulating the amount of taxes from farmers is the difference between the basic principles of agricultural taxation in Ukraine and the EU. Indeed, the rate of the single tax for land use in Ukraine is relatively low, but Ukrainian farmers do not receive the subsidies that European farmers do.

"In Europe, EUR250 or more is paid annually per hectare of cultivated land. However, before the full-scale war in Ukraine, state support did not exceed an average of EUR6/ha. The absence of subsidies in Ukraine is partially balanced by a low single tax, which can be seen as a certain support for the agricultural sector. In 2021, farmers received an average profit of EUR250 per hectare, so this balanced Ukrainian and European agribusiness to some extent," explained Dmytro Kokhan.

The specificity of the grain market is that agricultural products are sold on foreign markets with established prices that fluctuate within small limits from country to country. European farmers "fit" into the parameters of the global market due to large subsidies, while Ukrainian farmers are able to do so, among other things, due to a relatively moderate tax burden. Therefore, an unjustified increase in taxes will make Ukrainian agribusiness uncompetitive.

For this reason, Dmytro Kokhan advised to refrain from any tax changes until the end of the Russian invasion, so as not to undermine the existing tax base. After the war, Ukraine should evaluate the transition to the European model of agribusiness: if the Ukrainian farmer also receives large subsidies, then it will be fair to increase the single tax based on economic justification.