Business ready to help monotowns

Ukraine’s monotowns may have a new social-infrastructure-financing mechanism, developed by the Federation of Employers of Ukraine (Ukrainian abbreviation, FRU). FRU will shortly file a proposal with the Cabinet of Ministers of Ukraine, to the effect that the tax burden on urban-developing businesses be lessened, so they can reduce the tax base to the costs of advancing such monotowns’ production facilities. At present, such businesses can finance social infrastructures only by using taxable income, which means limited financing. “Why levy income tax on money being spent on the development of monotowns?” wonders FRU head Dmytro Firtash, adding that ways to implement this initiative will be discussed during the next FRU board meeting in May, whereupon the final text will be forwarded to the Cabinet.

Monotowns constitute a pressing issue in Ukraine. As another Soviet hangover, these populated areas depend on a single industry, one or two large factories located right there or in close vicinity. Out of 459 Ukrainian cities 120 are monotowns inhabited by over 2.5 million people. The central budget can’t solve their social problems, like the maintenance of grade schools, hospitals, and orphanages. The Day asked local mayors and economists for comment.

Volodymyr HROISMAN, mayor of Vinnytsia:

“That’s a good initiative and I’d implement it not only in monotowns. Part of the income tax returns could be channeled into urban development programs, regardless of the size of a given populated area. This would spell progress for the regions and help get them involved in the economic process; the local authorities would be motivated to advance the local industrial potential. Also, this would add to Ukraine’s economy. All budget funds could be channeled into infrastructural projects – particularly the energy-saving ones. After all, part of the sum exempted from the income tax (when channeled into the social sphere) will end up on budget accounts on different levels, considering that this money will be spent on services, purchases of materials, and so on.”

Valerii HEIETS, director, Institute of Economics and Prognostication at the National Academy of Sciences of Ukraine:

“A similar approach has long been effectively practiced across the world. [If and when this initiative is carried out] it will serve to strengthen the sense of responsibility in Ukrainian business and make it socially-oriented. Lots of work to be done here, including personnel retraining and refresher courses, support of institutions of learning, all the way from daycare center to grade school to college to university, also protection of the environment. All this is the social responsibility of national business, and it’s high time Ukrainian business became aware of it.”