Ukrainian reforms: for the people or for the elite?
The new government brought in its wake the promise of 21 strategic reforms intended for immediate implementation. Despite a consolidation of power into the President’s hands and over a year in office only two of these reforms have been attempted, a new tax code and reform of the state pension scheme. Local and international experts are in unanimous the both of these reforms were forced through without the necessary refinements required to ensure that the Ukrainian people benefit. Meanwhile Ukraine still lacks innovation, modernization and competition, all of which undermine the investment climate.
A stress test for the new government has been the adoption of the new tax code in December 2010. The promises to simplify business conditions did not correspond to the reality of the legislation, leading to the “tax maidan” protest with thousands of entrepreneurs out on the streets; only to be quashed by the authorities. The code is understood to have driven over 30 percent of business owners to close up shop, although many will find similar positions within the shadow economy. The number of newly registered economic entities has reduced by 60% since the new Tax Code was introduced. Currently around 400m000 small enterprises are on the verge of bankruptcy and the situation appears to be worsening).