Minister of finance of Ukraine Natalie Jaresko is convinced that it is impossible to cut public
spending by 25% within one year, as assumed in some models of the tax
reform which are subject to a public discussion today. Ms. Jaresko made this statement in today’s press conference at the press center of the Cabinet of Ministers of
«I am not talking about some concrete
option of the tax reform – there are
several models of «radical
reforms». But all these proposals result in the decrease
of tax revenues by UAH 150-200bn. This means
that we would have to cut spending accordingly, just like in tax reform
proposed by the Ministry of Finance. The reason is that irrespective of the tax
reform we have the same target – budget
deficit not exceeding 3.7% in 2016», the minister declared.
According to Natalie Jaresko, such a cut in spending means their
decrease by 25% a year. Cutting budget revenues by 25% can be easily done by cutting the tax rates, but cutting spending by the same 25% within a year is impossible, which is
also proven by international experience.
«According to IMF studies, there have been
only 10 cases in last 25 years when countries could reduce their spending by
more than 5% a year. The average
annual spending cut for these countries was 9.3%», the minister reported.
Thus, proposals made in some of the tax
reform options regarding a «radical» cut of the tax rates demand an answer
from the public: is the Ukrainian society ready to reduce social welfare for the citizens to
this extent? Is it ready to reduce the number of
schools and hospitals? Is it ready to cut the number of public
employees? Is it ready to radically cut spending for
the armed forces etc.?
«Both attractiveness for investments and
social justice are important for us. And we must find a balance between them», the minister said referring to
The minister is also convinced that cutting state revenues by a quarter without cutting public spending accordingly would be a «suicide» for the country, since such a step would result in the termination of cooperation with
the IMF and demand to «print money» to cover the huge public deficit.