The Grassroots Corner June 5 2020

Ukraine –
A Study In Corruption And How To Solve It

Corruption eats away at a Nation, and Ukraine has corruption spelled out on its nameplate.  When Ukraine was part of the Soviet Union, government bureaucrats looked out for themselves.  When the Soviet Union fell, and when Ukraine broke off and became an independent democracy, there were high hopes Ukraine’s fortunes would change.  Sadly, as the Soviet Union fell, Ukrainian oligarchs stepped in, and Ukraine became more of a swamp than ever.

A simple tax code like The FAIRtax could start to turn the tide.  But first, there needed to be political change.

On April 21, 2019, change started to come.  President Volodymyr Zelensky, a comedian and showman, beat incumbent President Petro Poroshenko in an election with nearly 73% of the vote.  On May 20, 2019, Zelensky became the new President of Ukraine.  Zelensky set about on a reform course.

The task for Zelensky wasn’t easy.  Oligarchs running powerful businesses such as oil and gas giant Burisma Holdings Limited still held sway over the government and drew in one of America’s top politicians.

Weeks ago, Zelensky responded to corruption by forming a National Reforms Council and appointing the former President of neighboring Georgia, Mikheil Saakashvili, now a Ukrainian citizen, to lead the body.  The National Reforms Council has, as one of its charges, to review Ukrainian tax code.

The principal taxes of the Ukraine today are the Corporate Income Tax (generally 18%), the Value Added Tax (usually 20%), the Personal Income Tax (generally 18%), tax on Real Estate Transactions, a Military Fee on income subject to personal income tax (1.5% given developments in the Eastern part of the country), and the State Social Insurance Contribution (22% - like our payroll tax). There are simplified options for “Personal Entrepreneurs”.  See Nexia DK, Tax Guide for the Ukraine, 2019.

The Ukrainian tax code can be a playground for the Oligarchs.  If the Ukraine were to adopt a simple tax code like The FAIRtax, the influence of the Oligarchs would drop.

We reached out to former President Saakashvili and offered to meet (I would go at my own expense) in the country's capital, Kyiv, to discuss The FAIRtax for Ukraine.  We wait to see if he responds.

Why should we want to help Ukraine?  First, the time to strike is now!  The time is now for the National Reforms Council to gather ideas.  If the National Reforms Council reacts, we could have a pro-Western country with a model tax code.

Secondly, if the Ukraine should adopt a FAIRtax-style tax code and have success with it, there would be real pressure on our politicians to have a hard look at The FAIRtax.

This isn't the first time we've reached out to foreign governments.  In 2012 we met in Santiago, Chile, with the government’s coordinator of Tax Policy, Miguel Zamora.  Zamora listened to the presentation with interest, but he and his boss, President Sebastian Pinera had other priorities.

Similar reasoning applies to the states of The United States.  We are encouraging Chuck Bailey in Alabama and Rob Rohrbough in Nebraska to press their state-level plans.  When one of those states has success with their state tax reform modeled on The FAIRtax, the pressure would bear on other states to follow, and in time pressure would bear on the federal government.

Do you have any contacts with governments who may be looking for a change?  Let me know.

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Yours In Liberty!

Jim Bennett
AFFT Grassroots Coordinator & Secretary