KIEV, Nov. 24 – Talks between protesting small business owners and the government collapsed on Wednesday in a development that threatens to escalate the political standoff in Ukraine.

The protesters vowed to continue the rally at a downtown square in Kiev until President Viktor Yanukovych vetoes the controversial tax legislation that had originally triggered the action.

“The meeting today ended with a mutual dissatisfaction,” Oksana Prodan, one of the leaders of the protest, said at the rally. “We left because we have to press for the veto of the president, otherwise we will not survive in business.”

To make their point and to increase the pressure on the government, the small business owners have called on thousands of other people to join the rally on Thursday.

The rally that involves thousands of small business owners began as a spontaneous action in Kiev and throughout other Ukrainian cities against the Tax Code that had been approved on Friday.

The legislation reduces taxes on corporations, but generally increases pressure on small businesses, including providing more powers to local tax inspectors that business owners believe would fuel corruption.

Between 15,000 and 20,000 protesters gathered for the rally in downtown Kiev on Monday, and hundreds have agreed to stay in the area through the next three days.

There were encouraging signs on Tuesday that a government team, led by First Deputy Prime Minister Andriy Kiuyev, may meet key demands from the protesters that would diffuse the standoff.

The government was apparently ready to meet five important demands, including allowing small business owners to hire more people and still be able to pay fixed taxes.

But the government apparently failed to meet one of the most important demands from the protesters, such as reducing powers of tax inspectors who are feared of fueling corruption by demanding bribes simply for ability to operate a business.

“We explained them, step by step, why we are against the increased powers of tax inspectors,” Prodan said.

Meanwhile, the government is facing a difficult choice as vetoing the legislation, known as the Tax Code, would send a wrong message to the International Monetary Fund, which may postpone $1.5 billion installment next month.

Ukraine relies on the borrowing from the IMF for bridging its budget deficit and for supporting the national currency, the hryvnia, which has been experiencing some turbulence.

Yanukovych has so far failed to make direct comments on the demands from the protesters, while his aides have repeatedly suggested that the president will seek a compromise.

“The president always managed to listen to both sides,” Hanna Herman, a deputy chief of staff at the presidential administration, said Wednesday. “I don’t remember ever the president taking a decision without taking into account positions of all parties involved.”

The president is required within two weeks to either sign or reject legislation approved by Parliament. The Tax Code was approved on Friday. (tl/ez)