1. A tax-paying business cannot compete. If you have a small business and you pay all the taxes, then at current prices you will most likely not be able to work. If an employee receives "on hand" 10 thousand UAH, the taxes will have to pay approximately 4.5 thousand UAH (SSC, income tax, military duty). That is, the amount of these taxes will have to be included in the price of goods or services to ensure a minimum margin. But if you pay all the taxes and raise prices, and your competitor does not pay, then his prices will be lower and, as a result, customers will go to him. Therefore, there must be a principle: either we pay everything and we all increase prices, or no one pays.
2. Not everyone should be issued. Many industries, such as agriculture, trade, and catering, are characterized by rapid staff turnover. For example, a student who wants to work as a waiter may come to work and decide in three days that he does not like it here. But such an employee still needs to be formalized, because our legislation does not allow for internships without an employment contract. Moreover, such a person is then very difficult to dismiss, because our labor legislation is more than 50 years old and it is not adapted to modern conditions. There is also a significant category of work that is performed once or for a short period, such as harvesting.
In works where the result can be clearly distinguished, it is better to issue an employee under a civil contract for a specific job and pay less taxes. However, the State Labor Service classifies such contracts as employment contracts and imposes fines on entrepreneurs.
3. Employees themselves do not want to formalize an employment relationship. This is especially common in rural areas, where there is already a shortage of staff. Employees often do not want to receive a formal salary because they may lose the right to a subsidy, or they may have credit obligations that they do not want to fulfill. Therefore, entrepreneurs have to take risks and pay wages in envelopes.
How does business work?
Even those entrepreneurs who employ workers, register them for the minimum wage. Now it is 6 thousand UAH. The rest of the salary is paid in an envelope. Many entrepreneurs enter into civil law contracts and pay taxes on the amount of remuneration, rather than on the minimum wage. Sometimes such contracts are concluded without a date in order to have them in case of verification. Some enter into training contracts for employees. The IT business most often registers its employees with FOPs, paying 5% from the employee's income and SSC. This model provides opportunities for the development of the IT sector in Ukraine and the interest of potential foreign investors.
Entrepreneurs also take different positions during the inspection of regulatory bodies, some defend their interests in court, and in the presence of properly executed civil law contracts, courts often take the side of business. In addition, inspectors commit a number of procedural violations during inspections, which is also a reason to cancel the fine. Many entrepreneurs choose the easier way and negotiate with the inspector on the spot for a "reward".
Instead of conclusions
Of course, undeclared work must be combated. After all, this is about the non-receipt of taxes in the budget, and the lack of guarantees for employees. However, our government is stepping on the same rake every year and wants to solve the problem through inspections and pressure on business. This scheme does not work, because it only develops corruption and creates a lot of problems for entrepreneurs. The legislator must address this issue with the adoption of a new labor code. It is necessary to give small businesses the opportunity for easier administration and registration of labor relations. It is also important to reduce the tax burden on the salary fund, because no one wants to work at a loss.
Article by Andriy Gevko, Bargen's partner for NV.
