Archive for April 2nd, 2011

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Opening and closing a business in Ukraine – changes on the horizon

April 2, 2011

Well where to start on this little lot?

Interfax-Ukraine
The Ukrainian cabinet is preparing revolutionary changes in company bankruptcy procedures, as well as additional measures to legalize wage payments and cut the number of taxes, Vice Premier and Social Policy Minister Sergiy Tigipko has said.

“There will be a revolution in approaches to bankruptcy. We have to quickly look for a new owner and quickly bring companies that might have been in a state of bankruptcy for years now back into the economy,” he said at a conference organized by Dragon Capital Investment Company on Thursday.

He said that the changes would reduce the term of making decisions on bankrupt companies’ property to 100 days.

He added that authorities plan to facilitate the procedure for the registration and termination of a business: ten draft laws on deregulation could be passed in April and May.

The new initiatives foresee that the availability of regulations would not be an obligatory requirement for the creation of a company. In addition, requirements on the minimum statutory fund and usage of stamps could be canceled.

Tigipko said that it was planned to reduce the term for opening a business by several times, from the present 23 days, and the term for business termination would be curbed from several years to 90 days.

He said that a cabinet resolution aimed at relaxing the procedure for land allocation for construction projects is being drawn up.

Commenting on the situation in the pension sphere, the vice premier said that parliament should support pension reform.

“UAH 30 billion is the deficit of the Pension Fund in 2009, UAH 34 billion in 2010. The deficit of the Pension Fund is over 3% of GDP. Of course, we cannot move forward with this problem,” he said.

Tigipko also said that first results of work of the authorities are being felt in the pension sphere: in January and February 2011 the Pension Fund obtained 22% more funds compared to a year ago.

These improvements do not solve the whole problem, however: in 2010 Ukraine had 13.7 million pensioners and only 14.4 million working people. Tigipko said that around seven million pensioners in the country receive pensions of less than UAH 900.

“We have to increase the number of working people,” he said.

The vice premier said that three draft laws on the legalization of wages have been drawn up.

“We will introduce some notions that business might not like,” he said, not disclosing the details.

He said that administrative reform would not bring much financial efficiency.

“I don’t think that we will get a lot of money from administrative reform. We could cut the number of servicemen, but I can say that on the other hand we have social issues [with them],” he said.

The vice premier also supported an increase of wages in the state management sector to curb corruption.

Tigipko also said that the government has not managed to carry out comprehensive changes in the state procurement sphere: around UAH 160-170 billion could pass through the system every year.
“15-20% could be saved if tenders were open and transparent,” he said, commenting on the reserves of the national budget.

As for the banking sector, he said that there are no systemic problems in the financial industry. He said that the economy requires a rise in crediting by 10-20% in 2011.

“The rise in credits by 1.1% in 2010 is not the kind of pace that we need,” Tigipko said.

Commenting on the tax sphere, the vice premier said that the automatic VAT reimbursement system is not working properly.

“We introduced automatic VAT reimbursement. We have problems today … 24 companies [receive VAT automatically ]… [but the number of the companies] is not high enough for us. However, I’m sure that the number will grow, and it will grow sharply,” he said.

Tigipko said that a new wave of decisions is expected in the tax sphere.

“In May we’ll start to discuss certain changes that we’d like to introduce. I think that we will propose the further relaxation of administration and reduction of the number of taxes and duties,” he said.

He said that the government is thoroughly monitoring work of new top managers of the State Tax Administration of Ukraine: if the work of the tax bodies does not improve, radical changes should be made, he said.

The vice premier also reported on the drawing up of changes in customs laws.

He said that among the possible changes could be the introduction of a clear mechanism for defining the customs value of goods, a full list of documents for importing goods to Ukraine, the relaxation of procedures and reduction of terms for customs clearance, and the introduction of penalties for customs bodies for the non-fulfillment of regulations in the IT sector.

“We’ll be the leader in Eastern Europe in the preparation and exports of software,” he said.

As for privatization, Tigipko said that the sale of Ukrtelecom had provoked questions.

“Not everyone liked [the sale of] Ukrtelecom. I’m sure that there was a lack of aid and consultations at the State Property Fund,” he said.

He said that a proper road show was needed for the privatization of such companies as Ukrtelecom to ensure the country gets the proper price.

Commenting on social prospects, he said that the government would continue subsiding poorest people to compensate for the rise in tariffs for gas.

I really want to throw my arms in the air and say “No, no no!”…….but he is absolutely right…..on all of it!

My only concern in anything he said relates to the issue of bankrupt company assets.  Not so much the 90 day insistence they are dealt with in such a timely way but the on going issue of the less than transparent courts and judges when it comes to who gets what.

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