Credit-Rating confirms the rating of Odesa at uaАА- The rating of Odesa confirms at uaАА- The rating of Odesa confirms at uaАА-

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Expert Opinion

26.05.2010

Rising Tax Burden in 2010 Will Contribute to Further Economy Shadowing

Credit-Rating thinks that the measures aimed at intensifying the tax burden are not going to fully help resolve issues connected with mobilization of recourses in budgets in the amounts necessary for implementation anti-crisis policy and will not solve the problem of balancing state finances.

The process of forming the State Budget was based upon rather pessimistic macroeconomic indicators: growth of real GDP at 3.7%; net foreign direct investments – slightly above year-earlier indicator; decline in unemployment by 0.7%. Thereat the State Budget 2010 has featured rise in tax receipts at the level which is not coherent with recovery rates – in fact the increase of tax receipts is anticipated at 36% or by UAH54bn. Moreover, on May 20th Verkhovna Rada passed a draft #6337, which changes standards of profit taxation, accounting and administration of VAT, and raises duty rates, which shall increase amount of budget receipts. According to Olga Shubina, a Credit-Rating’s Director of Rating Research Department ‘rising tax burden under slow rates of recovery in the real and financial sectors of economy will incline economic entities not to increase of tax payments, yet to seeking new ways for avoiding such payments. Besides, this may lead to business shrinking of a number of economic entities, washing out current assets, and to rising retail prices. Despite a demand to the Government to not allow retail prices grow, we should not expect any material effect from such claims.

It should be noted that the text of the draft contains a two-kind interpretation and ambiguity of implementation of certain norms, which may lead to tensions between economic entities and tax authorities. In this context an important issue is integrity of taxation system, i.e. performance of tax reformation and adoption of the Tax Code, which will allow for enhancements in efficiency of tax-related and budget policies.

Credit-Rating agency has operated in the Ukrainian market since 2001 being committed to assignment of the national scale ratings. The agency has assigned 1081 ratings. As at May 1, 2010 the agency’s list of ratings included 638 ratings: 493 in corporate, 98 in financial and 47 in municipal sectors.

Information on all credit ratings assigned in accordance with the National Rating Scale may be found in REUTERS and BLOOMBERG information systems.

For more information, please contact:
Information and analytic department
Sergey Rozumyak +38044490 25 50 
SRozumyak@credit-rating.com.ua 
Denis Rudenko
DRudenko@credit-rating.ua

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