Yesterday, the Global Business for Ukraine and the European Business Association held a business meeting with Yaroslav Zhelezniak, Deputy Chairman of the Verkhovna Rada Committee on Finance, Taxation, and Customs Policy, to discuss the reform of the Economic Security Bureau (ESB), the State Tax Service, and Customs.
Mr. Zhelezniak noted that the Law of Ukraine on the reboot of the ESB is currently in the implementation stage. There is a need to re-certify 700 specialists within 1.5 years. The process of establishing a selection committee for the ESB head has already begun. Additionally, two more commissions need to be created: one for re-certifying current employees and another for recruiting new ones. Ideally, each of these commissions should include six members from the business sector, NGOs, think tanks, etc. Employees who fail the re-certification will not work in the renewed ESB, and new employees will be recruited to replace them. Yaroslav Zhelezniak thanked the EBA for supporting the reform and expressed his belief in its success.
Regarding customs, the situation is quite similar to the ESB, but there is less resistance to the reform from various institutions. Draft law No. 6490-d, which has passed the first reading, is even more radical than the ESB. Moreover, customs reform is our obligation to the IMF, so ignoring it is not an option. The reform will involve measures similar to those in the ESB, including re-certification of old employees and the selection of the Head of the State Customs Service by a competition commission with international participation. A separate commission will re-certify the central office and regional customs offices—approximately 700 people over 1.5 years. Another commission will hold a competition for vacant positions. The re-certification of lower-level customs staff should take place within 3 years, and all employees will be transitioned to contract employment. The community welcomes the necessity of reform! However, the business community emphasizes that it is important to ensure competitive salaries for employees at the level of the private sector within the reform framework, as outlined in the mentioned Draft Law No. 6490-d. Low wages would nullify any reform, as has happened repeatedly in the past. Additionally, it is crucial to end the practice of the Ministry of Finance of Ukraine setting planned revenue targets for the State Customs Service and other controlling bodies. These targets do not reflect the quality of work or impartiality in decisions related to the completeness of customs payments and only encourage corruption and pressure on businesses. Mr. Zhelezniak emphasized that the country is ready for reform. We hope it will start soon.
Another key aspect is the reboot of the State Tax Service, aiming to change the corporate culture of this vital state body. The State Tax Service of Ukraine should cease being a tool for unjustified pressure on transparent businesses and transform into an agency that provides quality services to responsible businesses while effectively combating those who use tax evasion schemes.
Finally, there was a discussion on the currently debated draft law No. 11416, which proposes raising taxes. Mr. Zhelezniak first emphasized that it is important to carry out customs reform before adopting this law. Currently, he does not see sufficient support for the draft law. Transparent businesses undoubtedly understand the need to replenish the budget, but the chosen methods should be reasonable and beneficial for the country’s future. Therefore, the business community suggests focusing on the fiscal potential hidden in the shadow economy, launching economic reservations as an additional source of budget revenue, and evaluating whether there are budget programs that should be discontinued at this stage (e.g., the cashback program “Buy Ukrainian,” etc.). The consequences of simply raising taxes on transparent businesses could be entirely contrary to the officially stated (overly optimistic) expectations and extremely detrimental to the country and the economy.
We sincerely thank Yaroslav Zhelezniak for the meeting, the valuable insights, and we sincerely hope for continued cooperation to successfully implement the aforementioned reforms and other changes!
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