Currently, few people know WHY such a super-popular organizational and legal form in Ukrainian business as FOP appeared in Ukraine.
This was the largest economic reform in Ukraine during the times of Independence and possibly the largest economic reform in Ukraine’s modern history.
Reformer Kuchma (and Kuchma, despite the ambiguous Gongadze case, is the greatest reformer among all Ukrainian presidents) was tackling the issue of where to place the unemployed workers of the huge Soviet factories, which were producing unnecessary junk and going bankrupt en masse.
And Kuchma came up with turning the army of unemployed into an army of SELF-EMPLOYED. The red director Kuchma was pragmatic and understood the economics of the process well. Instead of paying unemployment benefits, the law on simplified taxation allowed small traders to pay a small fee to the state and forget about bandits and cops.
The key principle of this MOST SUCCESSFUL reform in the history of independent Ukraine was the RADICAL SIMPLIFICATION of accounting reporting. No tax invoices, no accounting, no inspectors – you pay 200 hryvnias a month and owe nothing more to anyone!
Kuchma understood that he simply COULD NOT control his law enforcers to prevent them from harassing businesses. So he simply REMOVED the very POSSIBILITY of harassing businesses by passing a law that eliminated any opportunity to mess with FOPs. It was wise.
You had to see the faces of the cops, who instantly lost their earnings.
And you had to see how in a few years bandits disappeared from the streets because small businesses no longer needed “protection,” and without money, the gangs simply ceased to exist naturally.
And now the Verkhovna Rada, consisting of minor losers who were on Mindich’s salary and are now rebelling because the money envelopes have stopped, decided to cancel the most successful reform in Ukraine and return FOP to VAT taxation.
And VAT, I remind you, is the most cursed tax, because the cops come right away with it. And no matter how correctly you pay VAT, a criminal case will still be opened against you. Because if there is any schemer or cash operation in the entire supply chain and VAT payment, the cops will screw everyone, and they don’t care at all whether you do business honestly or not.
Kuchma understood this. Therefore, he signed a law where there was no VAT and cops, but a simple and clear system of minimal reporting and minimal hassle in relations with the state.
Now under Zelensky, the 90s are returning. Just yesterday I had dinner with a friend, and we agreed that the president is very Soviet in his way of thinking and wants there to be as many state enterprises as possible in the economy and as little private business, which he cannot control.
And this desire to control the economy through state banks, the state Energoatom, state railways, state energy companies – it just kills the economy and democracy.
VAT for individual entrepreneurs is the worst idea to destroy the economy. It is a systemic violation of economic freedom and a breakdown of the business environment. It seems we are currently around 150th place in the world in terms of economic freedom. Now we will be at the 200th.
Such economic freedom rankings have nothing to do with the war and wartime restrictions. It’s simply because the mafia doesn’t want a free economy, as you can’t steal billions from a private company like Myndych, Halushchenko, and others did from the “state” Energoatom.
An absolutely disgraceful law. All who vote for it will remain disgraceful scoundrels until their death.
We all expected that the Ministry of Finance would finally propose real simplification of VAT administration in its tax draft law.
Individual entrepreneurs, experts, and members of parliament talked about it—there were more than enough comments and suggestions.
However, as it turns out, the Ministry of Finance has a different “highlight.” It’s automatic registration as VAT payers.
Without applications.
Without requests.
Without the taxpayer realizing the moment they enter VAT.
For ordinary individual entrepreneurs (not those accompanied by accountants from large companies), this can become a very unpleasant surprise—with all the consequences.
Automatic registration from January 1, 2027, will be based on lists formed by the tax authority from data from 2025–2026 reports if income exceeds 4 million UAH. That is, not by the classical “last 12 months” principle as provided in the Tax Code, but by sampling from previous periods.
Moreover, a reverse process is also envisaged: automatic cancellation of VAT payer status. Again, at the tax authority’s decision based on lists it generates.
Essentially, the taxpayer fully depends on whether they are included in such a list.
Can the tax authority guarantee the correctness of this process? Perhaps it’s enough to recall the blocking of tax invoices.
And one more thing.
Does this approach imply that the state does not trust the taxpayer by default and decides to act “on their behalf”? Even more so, it sees them as incapable of complying with the Tax Code norms. Because it certainly appears that way.
And most importantly, where are you leading micro-businesses?
Instead of simplification—to an even more complex, risky, and less predictable system.
The authorities don’t need new taxes. It turns out they have a lot of money.
What? Zelensky’s government talks about a lack of funds for defense and IMF demands? But these funds exist!
Look, under the brand of the good Zelensky, the government is throwing money at cashbacks and “e-bucks”, various seasonal supports, free railways, and sudden concern for the health of everyone over 40 (the most active voters, purely coincidental), spending more than 50 billion hryvnias a year. Why? Pay attention to the text in parentheses.
For comparison, these funds would be enough to raise the base salary for all military personnel by 5000 hryvnias. But for the defenders’ salaries, the government has no money.
With the International Monetary Fund, which provides aid to Ukraine, the government simply failed negotiations. Did the IMF want to levy VAT on individual entrepreneurs? No. They demanded to eliminate schemes where a large business divided into thousands of individual entrepreneurs avoids fair taxes.
Will they fill the budget with VAT from real small businesses? They won’t, because these entrepreneurs will simply disappear. They will close. How was it about the cow and the milk? Milked to death.
What could really stop the milking of individual entrepreneurs? Two things.
First – a luxury tax. If prosecutors, police, officials, and other vampires, whose relatives massively buy luxury cars in salons, have money for such purchases, let them pay 100% of the amount to the budget for luxury brands. That’s an example, there’s a huge field for tax creativity! But the government doesn’t want a luxury tax. Guess why.
Second – increasing taxation on the gambling business. However, in six years of legalizing “gambling,” all the governments of Zelensky have failed to create an online control system. The law requires it, logic too, but control is not happening! What a surprise, right? 🙂
So we don’t know the annual turnover – whether it’s 150 or 200 billion. And, therefore, there’s unplowed ground for shady deals and bribes. But 40% to 50% of the casino turnover could be used for defense and social payments.
Here are two sources the government doesn’t see. At all. But they want the parliament to vote for a stupid and harmful tax decision and take all the negative consequences on itself, while Zelensky continues to build his benefactor image with budget money.
So the question is – does the government really expect the Rada to swallow their proposal?
Illustration: “Debit-Credit”
