Budget-2014: back to Soviet Ukraine?

Our parliament must close the budget issue on January 16. Several days left before the second reading, yet the VR’s budget committee is still sweating over proposals and amendments, trying hard to keep all this away from the public eye. No one is sure when the committee will be convened because the chairman is absent.

Below are statements made in regard to the 2014 budget bill by experts versed in six industries, as requested by The Day.

THE GOOD OLD SOVIET SYSTEM OF CENTER-TO-REGION SUBSIDIES IS ALIVE AND KICKING

Oleksandr SERHIIENKO, director, Institute of the City:

“I can’t see any changes for the better. This budget [bill] reaffirms the good old Soviet practice of center-to-region subsidies. The local budgets are not self-sufficient. They are unable to wage their own social and other policies; they are totally dependent on what decisions will be made ‘upstairs.’ In Europe, local budgets are absolutely independent, and this is one of the pillars of what they know as local self-government. Here is some statistics. [Under this budget bill] UAH 74 billion is supposed to be received by local budgets by way of ‘general state’ tax returns, although the bill has a clause about the so-called evening-up subsidy in the regions, worth UAH 63 billion. The transfer procedures are not clear and nor are they on an even basis. The bill has it that Vinnytsia oblast will receive UAH 1.25 billion; Donetsk oblast: 1.235 billion; Luhansk oblast: 1.077 billion; Lviv oblast: 1.358 billion. Nothing for Kyiv, except that the capital city will have to part with one half of the individual tax returns. The rest of the oblasts will receive less than a billion hryvnias – Kyiv oblast: UAH 431 million; Kirovohrad oblast: 538 million. Such uneven subsidizing can’t be explained by referring to any understandable specificities or circumstances. As all previous budget bills, this one relies on additional subsidies. It is not transparent. It is politicized, so that a region or a city will get more when found to have been loyal to those ‘upstairs.’”

VAT REFUND PROBLEM IS STILL THERE

Serhii PRYTOMANOV, CEO, Federation of Metallurgists of Ukraine:

“Metallurgy is export-oriented and completely privatized, so we want to know how much we’ll get in terms of VAT refunds. The budget [bill] reads we’ll get some 47 billion hryvnias. That’s not enough. There are big debts from the past year. They are planned to be covered by government bonds. We don’t know how these deals will be made. No surrogate payments will solve this problem simply because they, in turn, will produce the problem of discount – in other words, such securities will be bought at a lower market price, and that lower price is what we’re worried about. In other words, the problem of VAT refunds remains unsolved. Another problem is the Tax Code. When the bill was debated at the Verkhovna Rada, its proponents said the biggest advantage was the clause about a gradual income and VAT decrease. Then the world crisis hit Ukraine and that gradual decrease was postponed for a year at best… We believe that the central budget increment figures are overstated. The government is ignoring our proposals concerning GDP growth; those ‘upstairs’ are obviously too busy building their image, so much so that any comment on the stated 3 percent GDP growth appears to be politically mauvais ton. I can only keep fingers crossed to see zero percent in the past year’s financial report. Let’s face it: none of the revenues stated in this budget bill will ever be received.”

TWO BILLION HRYVNIAS FROM CENTRAL BUDGET WOULD BE GOOD (ALTHOUGH WE ACTUALLY NEED TEN BILLION)

Lev PARTSKHALADZE, CEO, Ukrainian Builders’ Confederation:

“We are interested in bigger subsidies when working on 50/50 and 70/30 percent bank loan relief projects for young families… Last year we received about a billion hryvnias from the central budget for our mortgage loan projects, also UAH 300 million for 50/50 and 70/30. In 2014 we would be happy to receive two billion hryvnias from the central budget, although we actually need ten.”

LESS THAN A BILLION HRYVNIAS FOR AVIATION

Viacheslav BOGUSLAIEV, honorary president, Motorsich:

“Aviation needs between 3 and 4.5 billion hryvnias’ worth of central budget appropriations each year. This 2014 budget bill offers us less than a billion (through contracts on the part of various ministries). Needless to say, we are displeased with this kind of budget. I think this year will be hard but better than the previous one when most our enterprises were going down the drain. We can be supported, and not only by the central budget. Export-import bank operations are being practiced in China and Brazil. This is when one bank pays for exports and another one helps the buyers wherever they are. This practice should be used in Ukraine. We have been submitting such proposals to the Ministry of Finance for two years running. There is a pertinent clause in our Aviation Action Plan until the year 2020. There are banks, there will emerge a Development Bank and I’m sure it will start funding such projects this year.”