Tatyana Korotkaya: “Business in Ukraine complains about tax authorities, law enforcement officers and local authorities”

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In Ukraine, entrepreneurs often face a lot of problems in the course of doing business. “Sticks in wheels” can put tax authorities, law enforcement officers, representatives of local authorities. And for help, entrepreneurs, as a rule, turn to the Council of Business Ombudsman. Experienced lawyers and economists work in this structure, who can solve problems of any complexity.Deputy business ombudsman Tatyana Korotkaya told UA-Times in an interview about kinds of business which often comes for help, what problems help solve this organization and what system changes are needed in Ukraine to improve business.

– Tatyana, tell us how you conducted research on problems of small business?

We had two types of research. Firstly, we turned to our partners from the US Agency for International Development’s International Technical Assistance Program “Competitive Economy of Ukraine”. They conducted extensive research by region.The methodology was interesting: communication was organized with all groups of micro, small and medium business entrepreneurs. At the same time, there were exporters, women entrepreneurs.That is, we managed to cover all categories of this group of entrepreneurs. A number of problems have been identified during this study. It should be noted that we asked them to focus on how, nevertheless, the strategy of small and medium-sized businesses works. And the answers of the respondents were mostly aimed at this.

Our research was used only the statistics of the Council of the Business Ombudsman. Given that SMEs account for approximately 2/3 of our complaints, we focused on microbusiness. Here we chose microbusiness literally by hand. We are talking about 501 complaints that came to us the previous year.

It was important to look at these statements separately. Since it was necessary to figure out whether microbusiness problems are characteristic of the entire business or have some specifics. As a result, it became clear that there are specifics, and quite interesting. Now we can talk about this in more detail, since there are specific data.

– What is the most interested problems for small businesses now? 

The first category of problems is the administration and issues of tax.Unfortunately, the simplified conditions in which small or medium-sized businesses operate can periodically be used in various kinds of schemes.This causes rejection and criticism from the regulatory authorities.

So, the balance of interests must be respected. Of course, the state should consistently conduct its work. But efforts should not be made to suspect all entrepreneurs at once, take them under special control, exert pressure and let out only those who passed the test.

The same criteria, by which the search for unscrupulous taxpayers is being conducted, should be built differently. In general, small and medium-sized businesses should work quietly, and only those who raise some suspicions should come across. This approach will benefit the business. And entrepreneurs will be able to feel better and work more efficiently.

Actually, the current system was created so that microbusiness has easier working conditions. It works like this in many countries like Ukraine. But when schemes for abuse appear in a simplified system, this causes a constant discussion in society and, unfortunately, then the question is posed in the society either-or.

However, this problem is worth looking at from a different angle. If micro-business and self-employed people work in a legal field, then, probably, there is no need to raise the question of the effectiveness of the simplified tax system. It’s better to talk about how to deal with the shadow economy and increase the percentage of businesses that are ready to work officially.

This is the number one task. Indeed, in order to regulate something, it is necessary to cultivate the middle class. And business is not nurtured yet.Instead, unfortunately pinch.We are trying immediately, in one fell swoop, to improve the situation. It will not work out with all desire. This is a consistent evolutionary process.

In this situation, it is important to change the criteria by which tax authorities work with small or medium-sized businesses. It’s complicated. Because economic algorithms are “protected” in programs. But we must somehow reconfigure this system in order to maintain this balance between the interests of business and the interests of the state.

– The small business have complaints against law enforcement?

– Yes, this is the second group of statements. Entrepreneurs complain about the actions of law enforcement agencies. It should be understood that when it comes to unscrupulous taxpayers in business, this often leads to the initiation of criminal cases. But it is also common practice when law enforcement officers are not actively engaged in investigative actions for small companies.

When micro and small businesses turn to us, entrepreneurs just complain about ineffective investigations and the lack of investigative actions. There is also no dynamics in quickly closing the case if there is no longer a corpus delicti. Therefore, things can hang for a long time and ruin the lives of those who are involved in this.

All these are links of one chain. But tax and law enforcement officers would be better off concentrating on larger “fish”, rather than a small business. It is about finding serious violations and crimes. This is their direct responsibility.

– Actions of state regulators, as before, make life difficult for entrepreneurs?

– And this is the third category of complaints. It is about the actions of state regulators of all kinds. Complaints of this kind take up much less space among business complaints compared with complaints to the tax or law enforcement authorities. However, government regulators can still do something wrong with permits for small businesses.

Although speaking about the investment climate in Ukraine as a whole, it is worth noting that this problem has been practically resolved. For example, licensing issues are more or less normal. Unless there are problems in individual sectors, in particular, associated with subsoil, etc.

All of these issues are important for small businesses. Especially when it comes to the activities of local authorities. It is their permissive work that causes complaints. Because local governments issue various kinds of patents, trade permits, etc… In this situation, there may be a conflict of interest. On the one hand, local authorities may be incompetent. And all because, having received powers, they can’t cope with them. On the other hand, officials may abuse their position. And this is also a problem.

 

It should be understood that in small cities all people, as a rule, live nearby. Entrepreneurs and employees of local authorities. so, it is important to conduct professional development work with officials in dealing with small and medium-sized businesses.

You can not treat small business as a small value. Like, if you are not cool companies, so you are nothing. This is not true. About 40% of the population is employed in small and medium-sized businesses. It is extremely important to respect this. We must rejoice in the fact that they produce certain products and services.

Most of these companies basically “family type” and they provided by themselves.This is all the more important to consider in situations of economic downturn. And if these microenterprises could be completely removed from the shadows, this trend would significantly improve the economic situation in the country. But for this, local authorities should also work well, as they are on the first line of interaction with small businesses.

– In your opinion, how we can solve the long existing problems at the local government level?

– Unfortunately, often local councils, having tremendous opportunities and authority to make decisions, or take them wrongfully. Or they may act inconsistently. That is, at first they gave permission to build the object for a year, and then they don’t give the go-ahead puting the real estate in operation.And it hits the business that has made local investments.

Such a policy of unlawful decisions worsens the entire investment climate in the country. These imbalances in the will of the local authorities must be addressed.Perhaps decentralization reform will help solve the problem, since local authorities need not only to be given more freedom, but it is also important to have effective levers of control over officials

– What we should do in the framework of the decentralization reform?

It is necessary to take into account several important points. In particular, we are talking about the need to amend the Constitution.This is the introduction of the institute of prefects that have been talked about for a long time. Perhaps this idea is not the most perfect, but it has been worked out for years in Ukraine. Initially, this system was tested in France, then in Poland. Now this system is built in our country. That is, all the conditions are created for the prefects to appear. Now Ukraine expects these changes.

It is worth noting that before the presidents made attempts to amend the Constitution. But, apparently, these initiatives have not been tested, for example, for compliance with the charter of local self-government. Or other high-order documents were recalled. And still it needs to be done.

– What exactly will be useful introduction of prefects for business?

– Prefects will appear only after the necessary constitutional changes to oversee the constitutionality and legality of decisions of local authorities.They will have the authority to suspend decisions of local authorities until a final decision is made by a court. For business, this will be useful, since it will be possible to quickly suspend a solution that is in doubt. Indeed, now there is a “collective irresponsibility”, when the deputies of local councils, together with the majority, make decisions that are contrary to national legislation, and business waits for months for its cancellation in court. Formally, local councils act according to the law on local self-government, but in fact -is a mockery over local business.

– Will these measures will be enough to restore order on the ground?

– Another point is important – this is the law on service in local authorities. Everyone has long talked about public power reform, but has focused on a central level. New legislation has been developed. Even now, changes are being made to implement reforms faster. Moreover, competitions are introduced, openness is declared, personnel reserves are formed. That is all true.

But at the local level, the old legislation remains. And these short stories about contests and competitions for positions at the local level will not yield results.Because the requirements for local officials are long outdated. They need to be changed.

Now there is a bill that is registered in parliament. This is a parliamentary initiative. We hope that the document meets all the parameters. The policy of defining local government requirements is very important. And officials must meet strict criteria, be respected by society, and have a decent salary. Then the situation at the local level will get better.

– Do entrepreneurs complain about corruption?

– Yes, this problem exists. I can note that the Council of the Business Ombudsman can be considered an anti-corruption body. Since our structure was created as part of the anti-corruption initiative. And you need to understand that corruption, as a scheme of supply and demand, is also part of the business culture.

Unfortunately, small businesses have the desire to not burden the certain rules.This is evident in applicants who come to the Council of the Business Ombudsman for help. Periodically, they come and talk about situations when they have already tried to circumvent certain rules and nothing came of it. Therefore, you need to understand that it is better to act honestly and avoid corruption, then problems will be less .

– What sectors of small business are more likely to ask for help?

– In the first place – rather, the trading business.In second place are construction services. In addition, there may be services. This also includes transporter.

– Tell us, what kind of problems that Council of the Business Ombudsman successed to solve?

– There are cases of different orders. For example, we had a case of a small transporter .This is a private company engaged in high-tech transportation. The family-type company operates in Ukraine and invested in equipped trucks.As a result, the carrier in specialized tanks delivers harmful chemicals that are used for production.

 

As a rule, in our country there are no such companies. Similar services are mainly provided by companies from abroad, because they have the appropriate licenses and business has been established. But there is also a Ukrainian family that deals with such complex transportation.

This company had problems with permits and tax documents. Because they did not believe that they earn so much and spend so much. It was hard for us to prove. Literally I had to photograph this property so that the regulatory authorities received confirmation of the legality of the business.

– Did you solved a difficult situations at the local level?

– There are specific cases that are associated with local authorities. In one case, the head of the local government demanded a bribe. But it was informal and impossible to confirm.

The problem was that our applicant’s truck crossed the village, as he was transporting goods from point A to point B. According to the documents, the transporter had the right to cross the disputed territory. He is a local resident. But the local official began to put pressure on the transporter, they say, the truck spoils the environment and crashes the roads, so pay.

The business ombudsman’s council intervened in the process and was in fact a negotiator between the two parties. The carrier did re-sign the contract. Everything was legal. But the local head refused to sit down at the negotiating table. Only our mediation made him communicate with the transporter.

– What is the problems for the Council of Business Ombudsman have to solve in Kyiv?

– In the capital there was a rather bright case of 2015-2016. woman inherited her husband’s small business. It was a small family business for painting furniture items. That is, a paint shop. All documents were issued correctly. But by the time the woman became a widow, problems began. Prior to this, the husband ran the business, and her close friend was the chief accountant. A company with a good reputation, worked for 20 years.

The problem arose in the form of renewal of the emission permit. This permission is issued by the Environmental Inspectorate. The entrepreneur submitted on time, in 2 months, a new environmental report to the inspection.But the new certificate refused Informally demanded a bribe. Then they lost the report – an examination with the originals. So, without permission, the company did not have the right to work.

The situation did not move forward until the Council of the Business Ombudsman initiated an internal investigation. And as a result, certain officials were fired. and then the company received permission indefinite.

It so happened that when the workshop needed to update the permit, the legislation changed. And environmental permits for small businesses from urgent have become perpetual.This transitional period in legislation was used by an official who demanded a bribe from an entrepreneur.


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