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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Businessmen Prepared to Save Themselves

2 March, 1999 - 00:00

Will they be heard by a government which increases tax rates?

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.


 

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