UAC Analytical Center "Smart Country" together with a consortium of analytical centers evaluated the draft law "On Amendments to the Tax Code of Ukraine and some legislative acts of Ukraine (to improve the local taxation system)", which proposes changes in taxation.

In the agricultural environment, this bill was criticized very sharply.

"In general, the idea of transition to property taxation from the real value (based on data on the market price of the property) - is positive, contributes to a faire distribution of taxes. However, some provisions of the bill are risky, contradictory and could negatively affect the agricultural sector, "- the analysts say.

The experts explain: the bill sets uniform tax rates for the 4th group of single taxpayers.

“In particular, 2% of normative cash valuation (NMA) of the land from 1 hectare - for the land plot, the NMA of which is held; 3% of NMA per unit area of arable land - for land, NMA which are not conducted. At the same time, all payers of the single tax of the 4th group, along with the single tax, become payers of the land tax with the obligation to submit reports,” this information is mentioned in the letter.

The analysts emphasize that the proposals to modify the single tax of the 4th group contradict the task of all agriculture sectors legalization, significantly increase the tax burden on legally operating enterprises and, accordingly, the gap in the tax burden per hectare in legal businesses and illegal one. Also, the obligation to file land tax reporting for the subjects of the simplified system of taxation, accounting and reporting contradicts the very ideology of the single tax, which is to simplify tax reporting. Given the above, the idea of ​​obliging taxpayers of the 4th group to pay land tax is also counterproductive and contrary to the ideology of tax reform: expanding the base and reducing tax rates.

However, the changes will affect the real estate tax, tax rates on certain types of land: receive lower thresholds of land normative monetary assessment (NMA) which are carried out - not less than 0.5% of NMA, for public lands - not less than 0.5% of NMA.

Rates for agricultural land can increase significantly - up to 3% of NMA (a maximum is of 1% now). Land use fee rates will also increase: if the NMA is carried out, not less than 3% of NMA (now - not more than 0.3-3%), if it is not carried out - 5% of NMA per unit of arable land area (now - not more 5%).

The analysts explain that a full inventory of property has not been conducted theretofore, it is necessary that before the new tax all objects of taxation were entered in the State Registers, which requires the creation of an appropriate register of real estate or as a part of the State Geocadastre or as a separate register of real estate (Real Estate Cadastre) with the binding of the relevant objects to the universal coordinate system used by the State Geocadastre.

Determining the value of property on the basis of expert assessment, and even more so - on the basis of mass expert assessment - is extremely imperfect. This creates corruption risks, as well as distortions in the valuation of property in different regions, areas of activity, etc.

"For example, a mass NMA of agricultural land, which was held in 2018, led to a number of lands with low fertility which were rising sharply in price, and vice versa - NMA of fertile land fell below against NMA in arid regions. It should be noted that such problems arose despite the fact that by the time of the mass NMA of agricultural lands had accumulated extensive experience in applying the calculation of their NMA,"- the analysts said in the conclusion.

The bill also provides for the replacement of rent for land plots of state and communal property with a fee for use, however, the relevant changes to the paragraphs 288.2, 288.4 were not incorporated. At the same time, it is worth to pay attention to the lack of a unified approach to the establishment of taxes, fees and equality of all taxpayers before the law, which has the effect of violating the principles provided for in the paragraphs 4.1.2 and 4.1.11 of the TCU.

Thus, a land tax payer who lets out a land plot owned by him on the right of private ownership pays land tax on such land, while the tenant pays the rent (not to the state, but to the landowner). In fact, land tax and usage fees are paid from one land plot (currently it is rent). However, if a person leases a land plot that is in the state or communal ownership, only the usage fee is paid (currently it is the rent). In addition, the tax of the 4th group includes land tax, and the payer of this tax must pay an additional fee for use (currently rent) for one plot that is in the state or communal ownership, although other taxpayers do not bear the burden of double taxation.

A detailed analysis and conclusion to the bill was sent to the Committee on Finance, Tax and Customs Policy Chairman Danylo Hetmantsev. The analysts hope that the committee will take into account the comments and set up a working group to finalize the bill.

Conclusions to the bill were prepared by the UAC Analytical Center "Smart Country" together with the Institute of Socio-Economic Transformation, the Association of Tax Advisers, the Institute of Tax Reforms, the Analytical Center CASE-Ukraine, the Chamber of Tax Advisers, the Institute for Civil Liberties.