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Thousands Protest New Ukrainian Tax Code

KYIV -- Some 30,000 owners of small and medium-sized businesses have protested in Kyiv against a new Tax Code being debated in parliament, RFE/RL's Ukrainian Service reports.

The protesters' main objection is an amendment to the simplified tax rate. Small and medium-sized businesses currently pay a flat tax of 200-600 hryvnyas ($20-$75) per month, depending on the nature and volume of their business.

But the new code incorporates these small businesses into the general tax system, which protesters say opens the door to corruption and manipulation on the part of the tax authorities.

The simplified tax has been a big success for small entrepreneurs. The tax is a onetime monthly payment that allows business owners to avoid dealing with tax officials, many of whom are corrupt.

There are currently some 3 million registered small-business owners in Ukraine.

Maria Kostecka, the co-owner of a small accounting firm, told RFE/RL that the new code would increase her taxes to some 50 percent of her profits.

"If in January of this year the minimum simplified tax rate constituted 200 hryvnyas, then in January, according to the new Tax Code, that sum will increase to some 1,000 hryvnyas. That's five times as much!"

Anders Aslund, a fellow at the Washington-based Peterson Institute, says the proposed Tax Code is "good for big companies, bad for small ones."

"A 5 percent dividend tax for big companies is a big advantage and could lead to Ukraine's leading companies actually being based in Ukraine and not in offshore accounts," Aslund says.

"It's good to reduce corporate-profit tax. However, the two big drawbacks are that the simplified tax is being reduced in extension and another worry is that ordinary international accounting principles are not being introduced."

The new Tax Code has been controversial since it was introduced in July. The first version of the code was returned to Prime Minister Mykola Azarov with some 6,000 changes and amendments.

President Viktor Yanukovych threatened to veto the code if it did not reflect "national hopes."

Small business owners throughout the country have protested against the new tax law since it was unveiled.

In the eastern city of Kharkiv today, some 5,000 business owners rallied outside the regional administration building. Hundreds of others gathered in the eastern city of Donetsk, a Yanukovych political stronghold.

Azarov initiated a so-called "national discussion" of the code last summer that was largely confined to local bureaucrats, tax officials, and businesses close to the government.

Some 4,500 amendments were made to the draft code that parliament is currently voting on one article at a time.

Parliament plans to continue its session until late tonight and many protesters said they would continue to demonstrate. New groups of small-business owners continue to join the thousands already outside of parliament.

The protest's organizers said the number of protesters would reach 50,000 by the end of the day.