KHARKIV AWAITS ITS LAW

Verkhovna Rada has finally enacted the law on tax breaks for investors in Kharkiv. President Kuchma had earlier vetoed the law, insisting on revisions, but since the latter entailed only some minor changes to the law, the lawmakers agreed to them and approved the law.

Kharkiv Mayor Mykhailo Pylypchuk had said earlier he was confident the Deputies would agree to Kuchma’s criticism of the law. He said both variations suit the city, although Verkhovna Rada’s version shows more goodwill by establishing a lower investment ceiling to qualify for tax relief than the one proposed by President Kuchma. In the end, legislators accepted the President’s figure. Still, there are many opponents of tax breaks on high, and the policy will not get an easy ride even after it becomes law. It seems likely that the opponents of tax relief will put up a fight during the implementation of the project. On the other hand, project proponents in Kharkiv stress that, first, the tax breaks apply only to new investment, secondly, city budget revenue will not be affected in any way, and thirdly, for the next ten years total revenue to the budgets of all levels (considering all tax breaks awarded) is expected to reach UAH 2.5 billion, while the total in this program comes to a mere 250 million. In other words, tax and other payments in the budget will exceed the tax relief ten times over.

In addition, a favorable investment and credit policy could, according to preliminary assessments, could attract up to $1.6 billion US in investment to Kharkiv by 2010, making in possible to increase production, research and development three times, and create 50,000 new jobs.