Businessmen Prepared to Save Themselves

Last week, Kyiv hosted a Business Development in Ukraine: Financing Small Business meeting under the aegis of the UN Development Program.

The forum discussed implementation of technical assistance programs supporting enterprise restructuring and private sector development in Ukraine. A few days before this event, the Ukrainian community was informed of another approach to improving the situation regarding small business in Ukraine.

State organs and public organizations representing the interests of small and medium business should make an Economic Rescue Agreement. The originator of this idea, idealistic as it may seem at first sight, is Vasyl Kostytsky, People's Deputy and Chairman of the Ukrainian Union of Entrepreneurs in Small and Medium Business.

The point is quite clear: the executive and legislative bodies should undertake to lessen administrative regulation and the tax burden, and the businessmen, on their part, to operate only within legal limits. It should be mentioned that the Kyiv, Kharkiv, Lviv, and Ivano-Frankivsk businessmen attending the UN-sponsored seminar (held last week in Ivano-Frankivsk oblast), backed the idea. Of course, we would like to believe that the number of entrepreneurs still having faith in fair cooperation with the authorities is not limited to those who attended. However, after the lawsuits filed against the government by bankers and businessmen (the former, as we know, had been duped concerning the February government bonds, and the latter had been promised to have their profits assessed indirectly and with the participation of third parties), this faith could become an abstract illusion.

The statistics presented at the seminar by Hennady Bilous, Head of the Economy Ministry's Department for Non-Governmental Sector Development, show that enterprise in Ukraine is becoming extinct. Compared to 1997, the number of small and medium enterprises established last year dropped by 34% to 148,000 (versus more than 2 million in neighboring Poland) employing only 6% of the population. Consequently, they showed quite modest macroeconomic indices: last year the small business share of GDP was 8%. Many small and medium enterprises are engaged in trade and public catering. Ukrainian businessmen are trying to survive at the expense of capital turnover, for there is virtually no possibility for production activity today. The entrepreneurs are exhausted by the tax burden.

In this relation, many of them were upset that the seminar was not attended by First Deputy Head of the State Taxation Administration and Chairman of the Tax Police Volodymyr Zhvaliuk. On the other hand, other representatives of the executive related enthusiastically how a new Presidential decree on Deregulation would help businessmen. However, one businessman told The Day's correspondent that tax, sanitation, and fire service officials did and do conduct inspections weekly. The businessmen also wanted to know who hit upon the idea of introducing stamp duties (at this point, a Lviv businessman wondered when they would begin to tax the air). The quick response from Ukraine's National Bank Deputy Governor Yaroslav Soltys was that "the stamp duty is not a tax, but only a means to fill the state budget." The tax authorities also "promise" to have no mercy on those who fail to comply.

PS. A reliable source informed one Kyiv district tax administration that new tax rates had been received from the top. In order to hold the job, a tax inspector has now to collect 1.5 times more taxes and fines than last year.