Arbuzov: Cabinet works to deregulate business

The government systematically works to liberalize the tax and customs systems, deregulate business and increase the energy efficiency of Ukraine. This was stated by Serhiy Arbuzov, First Deputy Prime Minister, after a meeting with Olli Renn, Vice-President of European Commission, EC Commissioner for Economic and Monetary Affairs.

The global economic crisis and the associated economic downturn, declining demand and prices for traditional Ukrainian export commodities, inflated gas prices have all impacted on the economic situation in Ukraine, government analysts say, the Information-Analytical Bulletin of the Cabinet of Ministers of Ukraine informs.

At the same time, newly created industries, such as IT technology and manufacturing equipment for renewable energy, are dynamically developing. The industries that have been reformed or where reforms are underway in line with European standards – e.g. pharmacy and food production - demonstrate good performances, as well.

Much of that growth was due to the tax incentives, experts stress. The examples demonstrate a positive effect that might be achieved with proper tax or tariff regulation.

Experts also cite VAT situation improvement as a positive development in the tax reform area. Through the electronic register of tax invoices, the VAT reimbursement procedure has become more transparent. In January-October 2013, VAT reimbursements totaled 45.6 billion UAH, which is up 6.0 billion UAH, or 15.3%, year-on-year. Automatic VAT reimbursement has constitently grown. During the 10 months of 2013, VAT was automatically reimbursed for 19.7 billion UAH.

Experts say the government must continue to liberalize the tax and customs systems, deregulate business and increase energy efficiency. It can never give an immediate effect, but lays the foundation for future sustainable development of the economy, they emphasize.

Among steps for further liberalization of the tax system to be implemented, experts point to a lower effective tax rate. In their opinion, there is not so much a need to reduce the nominal rate, but to increase the depreciation rate. This will encourage investment in newly established enterprises and in upgrade of active part of fixed assets. The government should also liberalize and simplify the procedure for reassignment of administrative expenses to gross expenditures.

Also, it is important to reduce the rate of a single social contribution, although experts say this will first require reforming the system of social insurance.