You're reading: Yanukovych bows to protesters, crafts changes to tax code

President responds to street protesters by vetoing tax legislation.

Ukraine’s parliament hastily, on Dec. 2, rubber-stamped tax code amendments submitted by President Viktor Yanukovych amid mounting pressure from thousands of protesters.

Many of them are small business owners that said the government’s existing draft tax code – approved by lawmakers earlier this month – would bankrupt them and was unfairly tilted in favor of the rich.

Parliament’s vote came hours after government negotiators claimed to have struck a deal with the protesting entrepreneurs to keep a relatively small flat tax in place.

Afterwards, Economy Minister Fedir Yaroshenko enthusiastically said the cabinet and the entrepreneurs united in “one team.”

But the protest organizers, a grassroots group of small business advocates and union leaders, denied having struck a compromise with Yanukovych’s administration, and remained camped on Independence Square late on Dec. 2.

We are not happy with these changes.”

– Serhiy Fisun, press secretary of the Kharkiv regional entrepreneurial union.

They pledged that larger protests were planned in coming days because the president had not met their main demand – completely vetoing the current draft tax code and agreeing to write a new one from scratch in cooperation with small businesses.

“We are not happy with these changes,” said press secretary of the Kharkiv regional entrepreneurial union Serhiy Fisun who is representing the protesters led by Oleksander Danylyuk.

Fisun said the protesters are not going home until all their demands – vetoing the entire tax code, developing totally new document, and a national referendum on dismissing parliament – are met.

Yanukovych vetoed the tax code on Nov. 30, just three days after meeting with protesters.

“I share people’s concerns that in this tax code entrepreneurs’ rights are significantly limited and tax administration’s rights are excessively increased,” Yanukovych said on Nov. 30, referring to clauses in the tax code which would treat taxpayers as guilty until they prove themselves innocent.

But the president did not clearly state whether he will address the protesters’ other big concerns.

They see the tax code as unfair for essentially cutting taxes on big businesses, including the president’s oligarch backers, while increasing the tax burden on smaller firms.

The protests “strongly damaged Viktor Yanukovych’s mission to carry out reforms that wouldn’t impinge on the oligarchs,” said Vadym Karasyov, a political analyst and former adviser to ex-President Viktor Yushchenko.

Still, it remains unclear whether Yanukovych’s administration will fill the budget gap by increasing the tax burden on Ukraine’s bigger businesses and richest classes of citizens.

Iryna Akimova, first deputy head of the Presidential Administration, told parliament that the president tried to take people’s concerns into consideration.

Yet, opposition Bloc of Yulia Tymoshenko deputy Nataliya Korolevska said numerous shortcomings regarding regulations of small businesses still remain in the tax code.

We have poorly informed the public about the document.”

– Mykola Azarov, prime minister.

Prime Minister Mykola Azarov said the problem with the tax code was that some of the minor negative points overshadowed its positive side.

“We have poorly informed the public about the document,” he said.

Earlier, representatives of small enterprises said final victory had not yet been achieved.

“We won’t be happy with cosmetic changes,” said they in a statement issued following Yanukovych’s decision.

The protesting entrepreneurs demanded more than two hundred articles to be changed in the tax code – more than half the entire document. Azarov said the changes should be made in the next few days, but the protestors say this is impossible.

Speaking earlier this week, Volodymyr Fesenko, director of Kyiv Gorshenin Institute of Management, said that the thick-skinned presidential team is not used to giving out any concessions, and will not want to signal acceptance of defeat.

“The president might submit some minor amendments to the parliament that will be quickly adopted and then the tax code will be signed,” he said, adding that this might defuse protests sufficiently that people would start to head home.

Vasyl Yurchyshyn, an economics analyst at the Razumkov Center, says the authorities will still struggle to improve Ukraine’s standing in the World Bank’s “Ease of Doing Business” survey, where it is ranked 145 out of 183 countries.

Others are more skeptical about the anti-tax code blitzkrieg wanted by small businesses.

Read also ‘Political winners, losers of tax code debacle‘.

Kyiv Post staff writer Yuriy Onyshkiv can be reached at [email protected].