The document summarizes a public debate held in Kyiv, Ukraine on whether the rich should pay higher income taxes. Speakers for the motion argued that high taxes on the rich are a matter of social justice and help reduce inequality, as the wealthy benefit more from public services. Speakers against the motion countered that increasing taxes could encourage capital flight and the country should focus on effective management of tax revenue instead. In the end, the arguments against higher taxes prevailed in the audience vote.

1. www.debaty.org
THE RICH SHOULD PAY HIGHER TAXES
PUBLIC DEBATE BRIEF
May 29, 2012
Teacher’s House, Kyiv, Ukraine
The debate “The rich should pay high taxes” was the twenty-first public debate held by the Foundation for Effective
Governance in partnership with Britain-based Intelligence Squared. Borys Krasnyansky, managing partner of
PricewaterhouseCoopers in Ukraine, moderated the event.
As a result of many countries lacking finances to support public spending during the crisis, the idea of wealth redistribution
has come to the fore. The notion that the rich should share more of their money with society by paying higher income taxes
than the rest of the population is increasingly voiced in government and public circles. The debate on the need to increase
the tax burden of the rich has become increasingly topical in Ukraine against the backdrop of a growing gap between rich
and poor. Should wealthy Ukrainians pay a larger part of their income to the state than the rest of the country’s citizens?
During the debate speakers for the motion maintained that high taxes for the rich are a matter of social justice. In their
opinion this may help diminish inequality in the country. In addition, the rich should pay higher taxes than others because
they consume more public benefits than the rest of society. To prove their point the panelists highlighted that the wealthy
dominate use of services on roads and in airports.
Speakers against the motion called for the Ukrainian government to preserve the current taxation system claiming that new
taxes for the rich will encourage them to wire their money to offshore accounts. These experts believe that the country
should keep flat taxes, while the government must guarantee taxpayers that public money is effectively managed.
Arguments against the motion proved more persuasive. This panel won a sure victory, gaining 12% of audience votes from
an initial 39% to 51% at the end of the debate.
Public debates provide an opportunity to discuss the most topical issues of Ukraine’s economy. The project’s goals are to help
the public develop an informed view on the country’s economic situation and to facilitate a culture of constructive
communication about its most important problems.
Speakers FOR the motion Speakers AGAINST the motion
Viktor Suslov Ron Barden
Minister of Economy of Ukraine Partner, Head of Tax and Legal of
in 1997-1998 PricewaterhouseCoopers
Volodymyr Lavrenchuk Igor Mazepa
CEO of Raiffeisen Bank Aval CEO of investment company Concorde
Capital, Chairman of the Exchange Board
of OJSC "Ukrainian Exchange"

2. Key Statements
Viktor Suslov: “Today hired personnel pay 15-17% income tax, Ron Barden: “The only reason that politicians suggest
depending on their salaries. In the mean time, business owners increasing taxes for the rich is because it is a vote winner. But
give 5% of their dividends to the state. A very powerful and far- all evidence shows that high taxes do not improve tax
reaching class of people of independent means object to collections. People pay lawyers and tax advisers to pay lower
levying taxes on bank deposits. Moreover, the rich widely taxes. They migrate abroad or move their money offshore and
entertain a tax evasion scheme via offshore accounts”. restructure their businesses so as not to pay taxes”.
Volodymyr Lavrenchuk: “The rich should pay not only because Igor Mazepa: “Ukrainian taxpayers already pay more taxes
this is a matter of social justice and public benefit, but also than American citizens: a 15-17% income tax plus a 40% social
because they are the biggest spenders of budget money. They tax. The main problem is ineffectiveness in managing public
use an expensive infrastructure of roads and airports. funds. The government either misappropriates or mismanages
Additionally, the more a person pays in taxes, the more the money. Why then must a successful and financially
demanding he becomes about controlling how his money is independent person pay for a hopeless loser?”
spent”.
Q&A Session with the Audience
C: Olexandra Kuzhel: “I am absolutely sure there is no need to raise taxes. What is necessary is to manage the budget effectively.
Maybe then our taxpayers will have an incentive to pay.”
Q: “We have five kinds of taxes: on bank deposits, valuables, a single social tax, a tax on dividends and a tax on hired personnel.
Can they all be brought together as a single progressive tax?”
A: Volodymyr Lavrenchuk: “Under current circumstances a progressive tax for private citizens will fail as half of the income is
grey”.
Q: “Can you define an income tax rate for the rich in Ukraine?”
A: Viktor Suslov: “To begin with it must be as high as for the poor: 17% on dividends. The highest tax should be about 30%. Then
we could painlessly introduce a progressive tax”.
A: Ron Barden: “17%”
A: Volodymyr Lavrenchuk: “17% on dividends”.
A: Igor Mazepa: “20% including all social collections, but everyone has to pay: big and small, honest and dishonest, rich and poor”.
Q: “How should the law be amended to stop capital outflow from the country?”
A: Ron Barden: “It is impossible to stop wealth leaving the country. You need to create incentives to make the economy come out
of the shadow. A person who wants to buy a yacht will not buy it in Ukraine. There is no ocean so he has no other choice but to
buy it overseas. It is the same with money. He will keep it offshore. That is why introducing new taxes has no advantage”.
Q: “Isn’t it fair to leave income tax as it is now, but to levy taxes on consumption and property?”
A: Viktor Suslov: “That goes without saying. We have to use excise taxes more widely. We have to revise a draft on property and
introduce higher taxes on expensive real estate. I am also certain that bank deposits must be subject to taxation”.
Voting Results The rich should pay high taxes
Further information and the video version of the
debates are available on:
www.debaty.org and www.feg.org.ua
FEG, 8 Illinska Str., 8th Entrance, 5th Floor
Kyiv, 04070, Ukraine
tel: +380 44 501 41 00
feg@feg.org.ua