Land and agriculture
Land policy lies at the heart of an active and successful market economy and has a tremendous impact on country’s competitiveness and investment attractiveness. This sphere has always been a pearl and Ukraine’s unique selling point. Completing land reform agenda is impossible without competitive and well-functioning land market. The analysis of the draft law on land market has revealed a number of inconsistencies. The EBA in conjunction with the leading agricultural market players proposed a practical and coherent set of rules aimed at rebalancing land market, land tenure and land tenancy rights. The changes introduced by the lawmakers to the land market regulation set hurdles on the road to installing a healthy and competitive land market and harm agricultural sector development.
This is the only way to balance the rights of all market players, and architect productive and efficient rural market. Importantly, refined law on land market shall help Ukraine boost its agricultural productivity and increase its agricultural sector competitiveness which still lags behind other countries.
IT
In 2011 due to the retention of taxation privileges, the IT (information technology) sector in Ukraine displayed an unprecedented growth of 40 percent. IT companies managed to help Ukraine cross the digital divide by suggesting draft legislation on IT education and support of IT sector, which were supported by the government. Still, reform path this year may lead into the reverse direction unless the state continues to support IT companies and bring into place efficient taxation regime and clear and transparent approach to market players. The European Business Association has already voiced the necessity to deploy a special preferential taxation regime for IT sector. Information technology industry and software export is rightfully considered to be a goldmine for Ukraine’s economy, as Ukraine holds the TOP 10 list of world’s leading software exporters. Global experience of India and China, world’s leading software manufacturers, shows that taxation benefits and special tax regimes are the key to uphold IT industry and reach record productivity levels.
With all that in mind, EBA IT Committee proposes to set alternative tax rates – 5 percent for income tax, 5 percent for personal income tax and 5 percent for the single social contribution. Thorough economic research conducted by EBA IT Committee has showed that in case all proposals are duly taken into account, IT companies will ensure additional budget inflow in the amount of Hr 180 million.
FMCG and retail sectors
It will come as no surprise when we join the majority saying that FMCG (fast-moving consumer goods) and retail sector will undoubtedly stay afloat provided that legislative provisions are brought into accordance with common sense and fair economic rationale.
Currently the EBA retail committee is advocating for an amended draft law of Ukraine on internal trade, which contains provisions hampering the healthy functioning of internal market. The draft law should be significantly improved taking into account the reasoning of business community. Adoption of the draft law in the current wording would have negative impact on competition, as long as it contains conflicting provisions with other legislative acts of Ukraine regulating contractual relationships between suppliers and chains, special products (alcohol and tobacco, etc.) as well as overregulated procedures for new sites establishments.
There is far more to explore than just what has been mentioned, such vectors as energy efficiency projects and alternative energy supply will be also high on investors’ agenda this year. Needless to say that development of the abovementioned sectors and Ukraine’s economy on the whole is impossible without fixing the main problems of the system such as corruption, court reform, VAT refund, currency regulation, customs procedures, technical barriers to trade and land reform.
Anna Derevyanko is the executive director of the European Business Association which brings together about 900 European, Ukrainian and multinational companies.
