Democracy Watch, 2012 - Issue 6

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) February 24, 2012 -- Officials' villas: top priority despite budget deficit

As the Administration of the President recently reported to the media, the country will spend over 50 million UAH (13.5 million USD) on the maintenance of government residencies in Koncha-Zaspa and Puscha-Vodytsia. The residencies in question include the mansions of the current Prime-Minister, Chairman of Parliament, former presidents, as well as other deputies and officials. Whilst increasing the financing for maintaining bureaucrats' mansions, the President and Prime-Minister of Ukraine have also announced continued cuts to social expenses; requesting that the citizens of Ukraine understand that these are unavoidable due to the state budget deficit(1).

At the same time this year’s budget provides more money for deputies mansions than for the development of local self-administration projects (26 million UAH / 3.2 million USD). The ‘mansion budget’ is also equal to the sum designated for the construction of housing for soldiers and civil servants(2). Having secured the financing for their mansions, officials seem unconcerned about the fact that in 2012 the minimum living income has been set at only 1017 UAH (127 USD) per person per month and minimum wage is 1073 UAH (134 USD) per person per month(3).

It remains to be seen whether Ukrainians will bear the cuts to social benefits in the context of uninterrupted financial support of state officials' villas.
(1) http://ukranews.com/ru//news/ukraine/2012/01/24/62465
(2) http://minfin.com.ua/2012/01/20/529413/
(3) http://www.epravda.com.ua/publications/2011/12/23/310870/

People First Comment: This is classic French pre revolutionary philosophy at its very best. “To hell with the people whilst we waste money on our little luxuries…” It didn’t end well for Marie Antoinette and will not end well for Ukraine’s self appointed political elite.

Ukraine maintains one of the third strictest tax regime in the world

Under 'Paying Taxes 2012', the annual report from PricewaterhouseCoopers, the World Bank and the International Finance Corporation, Ukraine has remained 181st in the ranking of 183 countries for three years in a row. Ukraine has demonstrated some of the worst possible results for ease of paying taxes, number of tax payments, time required to comply, and total tax rate compared to the rest of the world. Despite the new tax code, adopted with great fanfare by the current authorities and supposedly designed to improve business climate in the country, Ukrainian companies had to manage 135 separate tax payments throughout 2011, for which Ukraine is the worst in the world according to the ranking. Each company spent an average of 657 hours paying taxes (175th place) and faced a total tax rate of 57.1% (152nd place)(4).

By comparison the tax situation in Zimbabwe, which ranks 126th, is much better than in Ukraine. In 2011 Zimbabwean companies spent 242 hours on 49 tax payments with a total tax rate of 35.6%(4). Canada meanwhile, which ranks 11th, has only 8 tax payments taking an average of 17 hours to complete. In America (69th place), companies had 40 tax payments with an average of 66 hours spent(5).

With ineffective tax reforms and inability of the state to establish a dialogue between the tax authorities and the business community, it is no wonder that Ukraine remains a country of unrealised economic potential.
(4) http://www.worldaffairsjournal.org/blog/alexander-j-motyl/taxing-ukraine?utm_source=World+Affairs+Newsletter&utm_campaign=64d5546676-Blog_Bachrach_Johnson_Moyl_1_24_2012&utm_medium=email
(5) http://www.vtvplus.com.ua/lang/ua/news/ukraine/31972-ukrayina-v-mzhnarodnih-reytingah-de-mi-persh-de-ostann.html

People First Comment: This government seems to have the delusion that they can tap into any source of funding they like in-order to keep their political moneymaking machine working. They seem to think that the fruits of labour belong, as they did in the Soviet era, to the government and we should all be happy to live in poverty knowing that we are maintaining their system of control and protection. Under the Soviet system this political ethos had some bearing, under this government and administration it most certainly does not.

Furthermore they don’t even seem to have bothered to study taxation systems as it is a well known fact that the more you demand the less you receive. Margaret Thatcher proved this very convincingly in the 1970’s when she cut personal taxation from 33%, a level set by the previous socialist government, to 27% and moved the tax burden over to VAT increasing the rate to 15%. Government revenue increased by 13% and stayed that way as the general public accepted that the taxes were reasonable. Ukrainian taxes are not reasonable and therefore the government are going to have to employ an army of tax inspectors to discover every loop hole and tax avoidance scheme that Ukrainian society can create. However history also proves that when you deduct the cost of the tax collection system from the extra revenue they collect the difference is rarely worth the effort.

If the government really want to increase state revenue then they should tax the superrich… the problem being that they would be taxing themselves and their families so no current politician would ever vote for the legislation.

Constitution Court rules: no public information without state approval

According to a recent decision by the Constitutional Court of Ukraine all information regarding officials, politicians and the families thereof, about their financial dealings, real estate, holiday destinations, places of residence, religious beliefs and property relations with other people may not be revealed by the media. From now on journalists publish such information only by consent. The only exception is when the collection of information is a matter of national security. Olena Bondarenko, deputy from the Party of Regions, referred to the decision of the Constitution Court as a reminder of the responsibility for respect of official’s privacy(6).

Experts view the decision as legitimised suppression of information, particularly regarding cases of corrupt practices, in order that such information does not effect the parliamentary elections this autumn. This decision will doubtless contribute to the growth of corruption in Ukraine, which is already the worst in Europe.

The governing authorities of Ukraine have again proved that any steps towards positive reform are to be cancelled out by severely regressive actions. This time the government has practically torn up the law: On Access to Public Information. Meanwhile Ukrainian legislation provides no punishment for state officials who submit inaccurate information about the dealings of themselves or their families.

This new move has made honest journalistic research virtually impossible. For providing information about officials without their consent a journalist can face anything from a substantial fine (1100-2100 USD), two years community service, or even a prison term of up to three years(7).
(6) http://www.unian.net/ukr/print/482026
(7) http://www.epravda.com.ua/news/2012/01/30/314420/

Democarcy watch     People First Foundation     Victor tkachuk