IMF offers to the authorities of Ukraine to strengthen tax burden on the rich people!

28.05.2012 International Monetary Fund (IMF) recommended to the Ukrainian authorities to take measures to retain the state budget deficit in order to meet the government’s 1.8 percent of GDP. These could include raising tax rates for high earners, ending tax exemptions, or reducing expenditures.

It was issued by the chief of IMF mission, Mr. Chris Jarvis at the press conference on the results of the mission in Kiev from 21 to 28 May.

Also IMF insists on raising gas, heating tariffs and exchange rate flexibility as conditions for the resumption of lending to Kiev. However, President Viktor Yanukovych eliminated to rise gas prices for households to get the IMF loan.

In 2010 Ukraine has agreed with the IMF on a program to allocate loans totaling more than $ 15 billion. According to the program Kiev was granted just two tranches, and then transfer of funds was suspended by the IMF due to failure by the Ukrainian government a number of conditions that are considered necessary. Thus, Ukraine has refused to raise gas prices for households and failed to comply with terms of the pension reform.

At this moment the IMF is ready to return to the topic of financing Ukraine only after they see the authorities’ intention to continue the reforms.

Meeting of the Board of Directors of the IMF, which will discuss the decision of the prospects of cooperation with Ukraine, could be held in the end of June.

Expert’s opinion

It is logical concern of the lender about the safety and refund of credits.

Especially when the whole country is credited.

And besides the budget of the country – loan and interest of the loan, to take money for return is nowhere.

The Government of Ukraine is worried about where to get money for the budget? What other taxes to impose that would boost the coffers?  How to dodge in order, without lifting the economy - to shoot a lot of money?

In the 90s years, during the period the formation of capitalism and after the collapse of Soviet Union there was a saying: «If you want to cow give more milk and eat less - it needs more milk and less to feed».

As we understand, the cow means all the people, all the taxpayers, consumers of social benefits. The same "plebes" who during the election, proudly called "the electorate".

The IMF encourages Ukraine to take action to reduce costs - that is, reduction of subsidies to the population in the first place: by bringing energy prices, at least to the cost (currently rates for the population covered about one-fifth the cost of imported gas). This is the second part of the recommendation "is less to feed." And by the way - the most realistic in terms of increasing the budget.

And as «more milk» - is proposed to increase taxes. Sounds, even the phrase "luxury tax".

Thinking people understand that the percentage of "rich" as part of a tax is so small that the increase in taxation of the "oligarchs" even twice - to increase tax revenues to the treasury for not more than 1%.

At the same time, this tax increase will definitely be seen by the economic elite of Ukraine, as a signal to the flight of capital. Adding an understanding here that the "oligarchs" close to power, regardless of the tax increases - to pay them will not - understand that this is pure populism. Like, here we are rich and arrange a tax increase, and you (the plebs), just something a bit will increase the payments.

And the purpose of such a rhetorical one: to prepare the plebs to raise levies which will undoubtedly be raised (but only after the election).

On the basis: http://www.imf.org/external/russian/index.htm

Yaroslav Lomakin ( Managing Partner of Honest & Bright Company Ltd )