The IMF criticizes Ukraine’s simplified taxation system.

The comments relate to certain aspects of the simplified taxation system based on the single tax in Ukraine. It creates opportunities for arbitrage between tax groups and lower taxes instead of the generally accepted goal of reducing the regulatory burden for small businesses, as detailed in the first review of the IMF’s Enhanced Financing Program (EFF) for Ukraine.

“Attractive benefits in the form of low effective rates are provided to legal entities and professionals who would not have the right to a single tax regime in other countries,” the fund’s experts noted. They indicated that taxpayers in the simplified tax system could strategically minimize their tax burden by repeatedly switching between paying income tax under the general and flat tax systems.

Separately, the IMF criticizes the 2% single tax rate for big business introduced after the war, but the parliament has already passed a law on its abolition as of August 1.