An economist on the funded pension system: the bill will drive salaries into the shadows

The draft law on the funded pension system, which was unveiled by the Cabinet of Ministers, will add to the burden on enterprises in the crisis, leading to the shifting of wages into the shadow economy. This was stated by economic expert Viktor Medved.

"I assess it extremely negatively (the draft law on the funded pension system - ed.), because it actually means increasing the taxation of various enterprises. That is, it increases the tax burden. And it should be noted that it would be correct to form the Pension Fund through the sale of privatization objects, for example. And, accordingly, the Pension Fund would then invest the money and receive interest. This interest would be used to pay for pensions and so on. This would be the right, correct mechanism. But now, in fact, they are imposing additional fiscalization, an additional burden on enterprises in the current crisis. This will have a negative impact and will lead, first of all, to shifting salaries into the shadow economy," Viktor Medved said.

He noted that the draft law increases the burden on enterprises.

"In addition to the existing taxes, taxation will actually increase. That is, part of it will go to traditional pension funds, and part to non-state pension funds. If they reduced the share of the state pension fund and the other share went to the accumulative fund, this would be the right way. As it is, they are simply increasing the taxation system," the economist added.

According to him, the whole issue is that the Pension Fund is in deficit and is financed from the state budget.

"That is why I propose to replenish the relevant Pension Fund through the sale of large-scale privatization objects, sale of subsoil, etc. These are the non-fiscal areas where the state receives funds. If you work in this direction, you can accumulate, for example, 30-40 billion annually and replenish the relevant fund. By reducing the burden on enterprises, this will stimulate the development of both enterprises and pension funds, which will then invest the funds in non-risky operations. In fact, they finance enterprises through unofficial intermediaries. And this develops Ukrainian enterprises and the economy. And what they are doing is actually increasing taxation in a crisis. Not all, but some companies.

As reported by the Prime Minister of Ukraine, the government will decide on the recommendation of the Verkhovna Rada to approve a bill to increase the unified social tax by 7 and 15% for people with heavy work. This will allow them to receive a funded pension.

The Ministry of Social Policy explained that with the introduction of a funded pension for workers in heavy occupations, only the mechanism for reimbursing preferential pensions will change - it will be through the payment of an increased unified social contribution rate.