Business – it is easy! Do it!

17-01-2016

 

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Promoting business activities will allow to stop the decline in employment and the rise in unemployment. The number of people, paying a unified social tax , i.e. the officially employed citizens, fell to the minimum since the independence – less than eight million people.

The number of people, paying a unified social tax , i.e. the officially employed citizens, fell to the minimum since the independence – less than eight million people. There were 14 million employed people three years ago. Meanwhile, the number of working-age population is 18 million people and most of them work abroad, live in the occupied territory or just don’t have any job or work in the hidden economy.

Unlike the EU countries, Ukraine can’t afford subsidizing, creating new vacancies and new enterprises. One of a few effective tools of the government is a simplification of conducting the business activities through deregulation, fighting corruption and improving the investment climate. One of the most common mechanisms is to use the methodology of the Doing Business rating. This is a tip for the government on what is necessary to do in order to simplify doing business in the country.

Last week, the Cabinet of Ministers decided for the first time to listen systematically to the advices of the World Bank Group’s experts and adopted the integrated implementation plan for the best practice of effective regulation as reflected in the World Bank Group’s methodology of the Doing Business 2017 rating. This is a document consisted of 57 points, by doing which Ukraine has all chances to be among the first fifty countries in the Ease of Doing Business Ranking.

What lies ahead?

The action plan consists of ten sections according to the number of ranking’s sections, each of which lists what the government should do and what laws the deputies should adopt to improve the investment climate in Ukraine.

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Section One. Business registration

Ukraine has the greatest progress by this indicator now – the 30th place, and our rating increased by forty position for the last year. To start a business in Ukraine it is required to spend on average 7 days and go through four procedures. Our goal is to reduce by half the number of procedures to set up a business which can be done in two days. The biggest problem is the inability of a VAT payer to perform the registration simultaneously with the registration of a legal entity. The government will submit this draft law to the Parliament shortly after the start of the year. In addition, the President has just signed a new version of the law “On state registration of legal entities and individual entrepreneurs and community groups” that will allow to establish a registration service for legal entities via the Internet within 24 hours.

Section Two. Enforcement of contracts

The 98th position. Ukrainian business spends on average 378 days to ensure the judgment enforcement and its legal costs on average amount for 46% of a claim sum. Our goal is to reduce by half the terms of proceedings, satisfying judgement and legal costs.

The biggest problem is the inefficiency of the state executive service: more than half of judgements are simply not enforced for the moment. There are two draft laws currently in the Verkhovna Rada – “On enforcement proceedings” (#2507 as of 14/08/2015)

 and “On bodies and persons engaged in judgments and other bodies decisions” (#2506a as of 14/08/2015), the adoption of which will allow to create private executive services. Hence, both investors and ordinary citizens will be able to execute judgments quickly and efficiently. Another task for the government is to enhance opportunities for the alternative dispute resolution by increasing the powers of arbitration courts and the mediation mechanism settlement by adopting the law on meditation – voluntary and pre-trial mediation in resolving conflicts.

Section Three. Getting a loan

The 19th position. Ukraine has the best ratings by this indicator. However, now the loans remain expensive and inaccessible, including because of the transparency problem of operations in pledge of movables and limited enforcement mechanisms.

Our goal is to reduce the cost and increase the availability of loans for business by:

– opening the free online access to the State Register of Encumbrances over Movable Property;

– providing the opportunity of trust transfer of property ownership to a creditor as a way to meet the obligations.

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Section Four. Protection of minority shareholders

The 88th position. Today, the rights of minority shareholders are still not protected because of a lack of effective accountability mechanisms of enterprises’ management and the non-transparency of their administration.

Our goal is to increase the level of protection of minority investors significantly by:

– increasing the responsibility of heads of enterprises and improving the accountability mechanisms;

– simplifying the protection of rights in courts for minority shareholders;

– increasing the transparency of enterprise administration.

The biggest problem is that in Ukraine minority shareholders are not able to fire and don’t have the right to demand in court to hold accountable an involved director/a supervisory board member for losses caused to a company. The draft law “On amendments to the Law of Ukraine “On Joint Stock Companies” (on protecting the rights of minority shareholders)” that will give more rights and opportunities to minority shareholders and assign double responsibility for directors is designed to solve this problem.

Section Five. Resolution of insolvency

 The 141st position. The bankruptcy procedure takes an average of 2.9 years and its cost is 42% of the debtor’s assets. The creditors receive on average only 8.3% of the total debt that is 4.6 times less than the average index in Europe and Central Asia and 8.7 times less than the index of the Western developed countries.

Our goal is to reduce by half the bankruptcy procedure duration and increase the debt percentage that can be returned to creditors by fourfold.

Other pressing problems include a lack of a database of debtors, which can be available for creditors (mortgage and bankruptcy creditors) through the Internet and would be filled by an insolvency official, and a possibility to sell significant debtor’s assets without a mandatory consent of a creditors’ committee. The draft law “On amendments to some Laws of Ukraine (regarding increasing the efficiency of bankruptcy procedures)” #3132 that is ready for adoption in the first reading will solve this problem.

Section Six. Electricity supply network connection

The 137th position. The period of connecting to the electricity supply network is 263 days and its cost is 795% of the gross income per capita that is twice as long and expensive than the average index in Europe and Central Asia.

Our goal is to cut the connection cost in half and the terms – by fourfold.

Other problems include a lack of responsibility of the regional power distribution company for the power outage and poor results of the forced outage time and frequency in the country.

The government should prepare and submit the draft law “On amendments to the Law of Ukraine “On electric power industry” (on simplifying the procedure of connecting to electricity supply networks)” to the deputies in order to solve the above-mentioned problems.

Section Seven. Receiving construction permits

The 140th position. The cost of receiving construction permits amounts to 15.2% of the construction value.

Our goal is to reduce the cost of construction licensing procedures by threefold and their terms – by 30%. Key issues: a real estate developer has to pay the equity participation for maintaining public infrastructure, which is a kind of a construction tax, at the same time an official doesn’t register construction declarations without a bribe. The first problem is solved by adopting the Law “On amendments to certain legislative acts of Ukraine regarding cancellation of share participation in maintaining public infrastructure”, and in order to reduce the corruption in the construction area, it is needed to adopt the Law “On regulation of urban development” regarding cancelling the registration procedure of the construction declaration.

Property-reg_DB_enSection Eight. Property registration

The 61st position. The average registration period for transferring real property ownership is 23 days.

Our goal is to reduce this period threefold. For this purpose, the government should introduce a monetary evaluation of land parcels with the help of Internet-services for one day and implement the Law “On state registration of rights to real estate property and their encumbrances” which was recently signed by the President of Ukraine Petro Poroshenko.

Section Nine. International trade

The 109th position. The time spent on exports from Ukraine is 122 hours and on imports in Ukraine – 210 hours.

Our goal is to reduce these terms twice (up to 58 and 100 hours respectively). For this purpose, it is necessary to run the system of authorized economic operators, reduce the period for obtaining a certificate of goods origin and introduce the “single window” mechanisms when the goods are crossing the customs border of Ukraine.

Section Ten. Tax payment

The 107th position. A small enterprise spends 350 hours per year on tax calculations and payments, and the fiscal burden on it reaches 52% of its profits.

Our goal is to reduce the time spent by a third (110 hours) and the fiscal burden – by 15%.

The most ambitious goal is to reduce the Unified Social tax rates to 20%. The government is ready to take this measure and the deputies will support it. In addition, it is necessary to cancel mandatory requisites of primary documents and simplify the tax invoice format in order to improve the rating of Ukraine.

Most of the required 57 regulations are prepared and some of them are under consideration by the Parliament while two laws have been just signed by the President. We have the government’s support and there is an understanding of the need to approve these laws by the deputies. It only remains to go and do it!

The source: “Economichna Pravda

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