World News

Thousands protest in Ukraine over tax reform

KIEV (Reuters) - Several thousand Ukrainian taxpayers, many of them running small businesses, protested outside parliament on Tuesday, urging deputies to vote down a proposed tax code that they say will hurt their livelihood.

The ex-Soviet republic is preparing to reform its notoriously ineffective tax system in an effort to cut its budget deficit in line with targets set by the International Monetary Fund, which is extending it a $15 billion bail-out.

The new tax code, to which parliament was giving a final reading on Tuesday, makes 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.

About 5,000 protesters, many of them market traders and small business entrepreneurs, massed outside parliament shouting “Shame!,” whistling, and drumming with plastic bottles.

Some carried posters saying “Keep your hands off small businesses!,” “Down with the parasitic authorities!” and “Tax terror must end!.”

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 of President Viktor Yanukovich says it is vital to entice businesses out of this “shadow economy” if it is going to boost revenues.

But Ihor Koval, 30, a market trader from the central town of Khmelnitsky, said the new tax code would only favor Ukraine’s already super-rich oligarch class.

“This government should know that no budget (deficit) can be plugged while millionaires carry watches worth thousands of dollars and buy yachts and houses. This code is for them, not for us.”

Mykola Samorodov, 47, another market trader from the town of Kuznetsovsk, said: “If this tax code is passed I will be left with only 10 per cent of what I earn. Small businesses will simply disappear.”

An IMF mission said on Tuesday that Ukraine’s performance was broadly in line with targets for the $15 billion program, and the Fund would decide on the second loan tranche by the end of this year.

Parliamentary time was extended unusually until 10 p.m. (2000 GMT) to allow full debate on the bill.

Reporting by Pavel Polityuk and Yuri Kulikov; Writing by Richard Balmforth; Editing by Kevin Liffey