Ukrainians to pay for FEZ in Donbas with their taxes – expert.

The issue of creating a free economic zone (FEZ) in Donbas should be reformulated and it should be asked if Ukrainians are ready to pay taxes for Donbas, Executive Director of CASE Ukraine Dmytro Boiarchuk has said.

"The president's question needs to be reformulated: are you ready to pay taxes for Donbas? This will be more correct," Boiarchuk told Interfax-Ukraine.

Boiarchuk recalled that in 2005 the government of Yulia Tymoshenko canceled tax incentives for technology parks, free economic zones and priority development areas, the lion's share of which was located in Donetsk region.

"After the cancellation of privileges, we were exposed to the amazing scale of tax evasion that took place in these priority territories. In the second quarter of 2005, VAT receipts jumped by more than 100%, doubling compared to the previous year. Income tax receipts in the same second quarter of 2005 were 75% more than a year ago," Boiarchuk said.

He added that in 2005, VAT receipts increased to $6.6 billion from $3.1 billion compared with the previous year. In 2006, VAT receipts doubled to $10 billion.

"At the same time, the processing industry (and this is basically the same Donbas) in 2005 slowed down to 0.4% year-over-year compared to a rise of 14.8% in the previous year. Preferential territories led to such metamorphoses," Boiarchuk said.

"It is obvious that in those days, technology parks, free zones and "priority territories" worked as internal offshores for tax evasion. At the same time, they did not have a significant impact on economic development," the executive director of CASE Ukraine said.

Interfax-Ukraine

News about recent political developments in Ukraine, key Ukrainian economic news and major current events in the CIS and the rest of the world.

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