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Thousands protest in Ukraine over the proposed Tax Code

16.11.2010    source: Reuters
Several thousand Ukrainian market traders and other small business owners have surrounded parliament in a demonstration against a proposed tax code they say will damage their livelihood.

Several thousand Ukrainian market traders and other small business owners surrounded parliament on Tuesday in a demonstration against a proposed tax code they say will damage their livelihood.
The government of President Viktor Yanukovich is preparing to reform a notoriously ineffective tax system in an effort to cut its budget deficit in line with targets set by the International Monetary Fund, a key financial prop for Ukraine.
The new tax code, to which parliament was giving a final reading on Tuesday, will make a number of companies and entrepreneurs no longer eligible for a simplified system that has allowed them to pay a single, relatively low tax rate.
It added up to more woe for the average Ukrainian who has seen domestic gas bills rise by 50 percent and also faces potentially unsettling reform of the pension system.
The new tax code will hit millions of low-income small entrepreneurs, from street traders and stall-owners to freelance taxi drivers, many of whom have benefited from tax breaks in operating small businesses on the margins of the system.
More than 5,000 protesters from across Ukraine massed outside parliament shouting "Shame!" and banging spoons on pans and buckets in a noisy demonstration.
Some carried posters saying "Keep your hands off small businesses!", "Down with the parasitic authorities!" and "Tax terror must end!".
Many said the proposed new system favoured big business and Ukraine’s super-rich and would kill off small and medium-sized concerns. "If we have to pay these taxes from January 1, then we will close down the next day," said 48-year-old Galyna Taran from the eastern town of Kryvy Rih.
Ukraine’s current tax system is ranked the third worst in the world after Belarus and Venezuela, according to the World Bank’s "Doing Business" annual survey of 183 countries.
As in many other ex-Soviet republics, businesses often choose to pay bribes instead of taxes, a practice that saves time and money but brings nothing into the national coffers.
The government says many small business owners do not pay pension contributions for their employers -- leaving this to the government -- and benefit from generous tax breaks.
"If they pass this tax code, then there will be six million unemployed. It will drive us either into the shadow economy or onto the street," Olexander Stepanchenko, a 45-year-old Kiev market trader, said.
Ihor Koval, 30, a market trader from the central town of Khmelnitsky, said it would benefit only Ukraine’s super-wealthy oligarch class.
"This government should know that no budget (deficit) can be plugged while millionaires wear watches worth thousands of dollars and buy yachts and houses. This code is for them, not for us," he said.
An IMF mission said on Tuesday that Ukraine’s performance was broadly in line with targets for a $15 billion loan program which Ukraine is drawing on.
The Fund would decide on a second loan tranche under the programme by the end of this year, it said. Parliament, in an unusual move, said it would extend debate on the tax bill until 10 p.m. (2000 GMT), though no vote was expected on Tuesday.

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