The Verkhovna Rada, Ukraine's parliament, adopted the austerity-driven state budget for 2015 during an extraordinary overnight session that ended early on Dec. 29.
Lawmakers
approved the document,
many not even seeing it, around 4:15 a.m.
Government
plans to collect $30 billion in revenue, including $1.1 billion from selling the
state-owned assets, and spend $33 billion. As much as $5.7 billion will be allocated to
defense and security purposes, $4.7 billion – to servicing the public debt and
$5.7 billion – to the pension fund.
Meanwhile,
the fiscal deficit is not expected to exceed $4 billion, which is 3.7 percent
of the projected gross domestic product of $108 billion.
The budget
is based on a forecast of a 4.3-percent gross domestic product contraction, in hryvnia terms, and 13.1-percent
inflation next year. The Cabinet foresees hryvnia’s rate against the U.S. dollar
at 17.
“To
be fair, this budget, as well as all the previous budgets adopted in these
walls, is far from being perfect,” said Prime Minister Arseniy Yatsenyuk
in a session hall after the bill was adopted. “This is why we’ve included
a requirement to conduct a mandatory review of it until Feb. 15.”
Ukraine’s
financial plan may be changed, depending on the results of negotiations with
foreign creditors, he added.
The
International Monetary Fund, the country’s key source of financial support and
policy suggestions, has immediately spread the news release on Dec. 29 that its
team will begin its work in Kyiv on Jan. 8 and will keep working until the end of the month.
“The
IMF is moving expeditiously to continue discussions with the Ukrainian
authorities on the IMF-supported economic reform program aiming to stabilize the
Ukrainian economy and restore sustainable growth,” it says.
The
budget doesn’t really exist, the Cabinet is just about to start writing it,
mentioned Igor Lutsenko, a member of parliament with Yulia Tymoshenko’s
Batkivshchyna party, in a blog on
Ukrayinska Pravda website. “A budget draft that was passed around
several days ago is out of date.”
“Blessing
the rape (of the Rada so it would adopt the budget) with the national anthem is a
very special sort of patriotism,” wrote Sergiy Leshchenko, member of Petro
Poroshenko’s Bloc in parliament. “I didn’t vote for it.”
Moreover,
parliament passed changes
to the nation’s tax system. Taxpayers will have to pay 9 taxes now
instead of 22 they had before.
A
previous increase of tax rates for extraction of gas, up to 28-55 percent, and
oil, 21-45 percent, is no longer temporary and is
seen as long-term policy. Companies that develop Ukrainian subsoil through so
called “production-sharing agreements”, a legal framework for large
development projects, will have to pay 70 percent in tax by the year’s end.
Meanwhile,
companies that export grain, country’s major product supplied to the global
market, will stop receiving the reimbursement of a value added tax, a 20-percent
duty that was previously transferred back to the payers if they sold their
goods abroad.
Traders
who sell imported goods on the Ukrainian market will have to pay additional
5-10 percent of tax, depending on what sector they’re working in.
In
order to provide an incentive for the business scene actors to report their
financials transparently, parliament adopted a decrease in a
social care fund payment rate, down to 16.4 percent from 41 percent.
As
most of the salaries in the corporate sector are paid in untaxed cash, due to
the rates seen as extremely high by the businesses, the move is focused on
bringing the true salary figures back to the tax base.
Rada
also set a maximum salary rate for the public officials at $540, only those
employed at anticorruption institutions may be paid more.
In
another austerity move, the number of employees of a State Prosecution Office
was cut by 25 percent, to 15,000. Meanwhile, police staff will now be reduced
to 152,000 officers from 172,000 the country had before.
Kyiv Post associate business editor Ivan Verstyuk can
be reached at [email protected].
