Speaking at a Verkhovna Rada seminar last Wednesday, NBU Governor
Viktor Yushchenko quoted former British Prime Minister Margaret Thatcher
as saying that only one kind of society has a chance to survive: one that
has a sense of justice and stable money.
In Ukraine, even the President does not seem to believe in either. Not
so long ago, he said that if he were the manager of an enterprise he would
not pay taxes. Yet this did not stop him from declaring at a meeting with
Kirovohrad oblast executives on February 10 that the situation in the country
could be improved only in the presence of a rigid vertical chain of command
and responsibility "from top to bottom."
Yet is this vertical chain ("from top to bottom") prepared to assume
responsibility for the fact that under the circumstances a decent person
simply cannot survive, and that Ukraine has actually turned into a country
of lawbreakers, with millions of citizens being forced to earn their living
illicitly?
Economists believe that countless Ukrainians are somehow or other involved
in or with "unlawful" business. Ukrainian expert estimates, polls, and
monitoring domestic enterprises show that 50% of the economy exists in
the shadows and is tax-free.
A sharp increase in the illicit sector over the past several years is
attributed by Volodymyr Lanovy, President of the Market Reform Center,
to the absence of tax adjustment in the face of production decline. "This
is evidence of the persevering totalitarian system and its chauvinistic
attitude toward private business and the people's enterprising spirit,"
he says.
"A newly created enterprise finds it extremely difficult to receive
a license. And even after living through the ordeal there is 98 kopiykas
worth of taxes per hryvnia earned. Do you call this normal?" Yuri Kudinov,
manager of a private firm in Kharkiv, asks indignantly, adding that working
under such conditions makes one resort to "double bookkeeping," in other
words keeping most of the revenues hidden from the tax inspectors..
German economist Ulrich Thiessen is convinced that today's shadow economy
surpasses the gross domestic product. In his opinion, many businesses refuse
to operate legally due to an "extremely complicated" business environment.
"The government facilitates the development of the shadow economy. Its
attitude toward enterprises is controversial; on the one hand, it demands
tax payments and levies fines; on the other, it forgives their debts. In
other words, it shows an example of how useless it is playing by the rules
in Ukraine and that those who do so are simply idiots," says Herr Thiessen.






