OPINION: Chasing Reform through Passage and Implementation of New Codes Regulating Business Activity

Posted by Jorge Zukoski on Sep 23, 2010 in News & Updates, President's Opinion | 7 comments

As summer fades into everyone’s memory and the new business and political season begins in earnest, there has been a flurry of discussion and work taking place behind the scenes, with the Chamber’s involvement, to make tangible progress in reforming key areas that directly impact the country’s competitiveness including taxation and customs policy as well as within the real estate sector. The necessity of wide-ranging reforms is a stated priority of the leadership of Ukraine and a benchmark for policy makers. This is especially relevant considering the recent negative news from the World Economic Forum when they released their Global Competitiveness Report 2010-2011 which is a stark reminder for key decision makers, representing both executive and legislative branches of power, that reform must be undertaken for the country to be successful in the future.

According to the new ranking Ukraine drops down seven positions and now occupies the 89^th place out of 139 nations (82^nd in 2009-2010). The current ranking is directly correlated to the lack of progress in reforms over the recent years as well as the negative repercussions of the recession impacting the economy.

However, the Chamber remains optimistic that the successful implementation of the Economic Reform Program, developed under the patronage of President Yanukovych, will ensure that the next round of competitiveness rankings will improve significantly. The expert community of the American Chamber of Commerce in Ukraine (Chamber) consolidated under Customs, Tax and Real Estate Committees continues contributing to the development of a new legislative framework based on international best practices adapted to the Ukrainian reality to further improve Ukraine’s competitiveness in attracting and retaining domestic and foreign investment.

A priority of the Chamber’s Customs Committee has been the development of customs policy and simple, modern and realistic legislation that allows the entire customs procedure to be more transparent and easy to manage by both customs authorities and the private sector. Recently the Chamber was officially invited by the Cabinet of Ministers of Ukraine (CMU) to take a leading role in developing new wording of the Customs Code that will create favorable conditions for the development of the economy while at the same time protecting the rights and interests of subjects of entrepreneurial activity and citizens, as well as to ensure adherence to Ukrainian customs-related legislation.

The Chamber Customs Committee is now actively focused on formulating professional comments and proposals on main clauses of the Customs Code including but not limited to customs valuation, management of customs payments, customs audit law enforcement functions, customs regimes, classification of goods, and declaration of goods. The Chamber’s proposals will be consolidated into the new wording of the Customs Code ensuring that the final version is modern, business friendly and aligned with international standards.

The Chamber Real Estate Committee is currently involved in the preparation of a package of laws intended to reform the sphere of real estate and construction in Ukraine. A special Working Group was created under the Cabinet of Ministers of Ukraine that brings together representatives from the Chamber, State officials and experts in the real estate, architecture and construction sectors. The following spheres are in focus of the Working Group: designing and engineering (architecture); land plot allocation, State surveillance and inspections as well as interaction with the local and regional governments.

Modernization of procedures in design and approval, simplification of land relations and streamlining the permit system in the sphere of construction plays a crucial role in the process of reforming this important and over regulated sector of the economy hampering competitiveness and investment. In this regards members of the Working Group were tasked to develop an action plan of reforms in the sphere of construction based on the experience of EU countries and Georgia, where an investor can start a real estate related project within ten days. This important task will remain a focus of the Chamber in the coming months.

The Chamber’s Tax Committee has been working very closely with relevant decision makers to bring the expertise and input from the wider business community to the forefront when developing the Tax Code which is seen by many as a litmus test as to whether or not the Ukrainian leadership is truly committed to reforming the system in a clear and comprehensive manner allowing the country to turn a page in the very long story book of broken promises and declarative statements about reform that never came to fruition.

The last several has seen an active discussion and interaction between business and government on the Tax Code within the framework numerous high level meetings at the Ministry of Finance, Working Group meetings under the Cabinet of Ministers of Ukraine (CMU), and Parliament Committee on Taxation and Customs Policy where the Chamber experts have been constantly involved. As for now we are following closely the movement of the Draft Tax Code that has gone through consideration of the special Drafting Committee under the CMU, as per the decision of the Cabinet of Ministers where Chamber experts were invited to ensure the wording of the document corresponds to the interests of the business community, and ultimately into the Verkhovna Rada where undoubtedly many changes will take place and earmarks inserted which may ultimately require a Presidential veto to bring rationality back into the process.

The Chamber and our experts are proud to active contributors to the activities aimed at reforming and modernization of Ukrainian legislation and we will continue advocating for much needed comprehensive reform of the Ukrainian taxation system promoting tax efficiency, fairness, neutrality as well as effective tax administration and enforcement which are essential in increasing Ukraine’s competitiveness and helping to overcome the recession that the economy is experiencing allowing the country to take advantage of global growth trends.

Understanding the new and existing challenges for the Ukrainian economy the Chamber stands committed to working closely with the Government of Ukraine in different sectors aiming to jointly implement the reform agenda outlined in both Economic Reform Program of the President of Ukraine and Chamber’s Partnership for Successfully Competing in Global Economy. It is a big task and one that the business community is committed to getting right the first time aiming to ensure Ukraine’s competitive positioning is significantly improved in the mid and long-term perspective.