Business urges not to support draft laws №3853-1 and №3853-2

25/ 09/ 2020

On September 24, there was a press conference dedicated to the shadow market in the four economic sectors of trade, namely electronics, medicines, automotive parts, food products, and alcohol. During the discussion, the community stressed the inadmissibility of repealing the provisions of laws №128-IX and №129-IX on software PTRs (SPTRs) and transparent rules for business “. After all, the smuggling of medicines, auto parts, alcohol, and electronics accounts for the budget losses of 82 billion UAH annually.

Thus, the participants of the event emphasized that the business has concerns about the high probability of failure in implementing the reforms set by the Laws of Ukraine. Since the adoption of the laws №128-IX and №129-IX, there was a registration of more than a dozen different draft laws aimed at repealing these laws. The draft laws №3853-1 and №3853-2 are among the latter. “The populist draft laws will eliminate everything that has started working and will set a precedent when part of the market will go into the shadows,” said Volodymyr Rudenko, Director of the Pharmacy Professional Association of Ukraine (APAU). Our association does not support these draft laws, and we officially ask the deputies not to support them. “

Viktoriia Kulykova EBA Consumer Electronics Committee Manager
The consumer electronics market in Ukraine is characterized by a large share of illegally imported goods (up to 30%) that do not meet the requirements of Ukrainian legislation, may not be subject to warranty service and pose a danger to citizens.

According to Ms. Kulykova, the solution to this problem is the mandatory issuance of fiscal checks when buying equipment and electronics. This requirement was introduced into legislation in 2017. But the non-issuance of a fiscal check was fined with just 1 hryvnia. Thus, it resulted in the failure of the reform, and the significant part of the industry remained in the shadows. The situation changed at the end of 2019 when the President of Ukraine initiated the draft laws aimed at de-shadowing the economy and cash transactions (№128, 129) supported by the Verkhovna Rada.

“The norm on the possibility of using SPTR (a virtual cash register in a smartphone) came into force on August 1 this year. During this period, there was a launch of more than 34 thousand SPTRs which issued more than 20 million electronic fiscal checks. “It simplifies the business processed, and we are very supportive of such kind of tendency,” said Viktoriia Kulykova. – According to the Ministry of Finance, the implementation of such SPTRs costs 4 thousand UAH per year including the device itself. Further maintenance and administration of SPTRs cost approximately 1200 UAH per year. It is three times cheaper than using cash registers, which cost about 11 thousand hryvnias on average. ” In her opinion, it is necessary to develop innovation instead of preventing its implementation with dubious legislative initiatives.

Christina Linichenko, EBA Senior Manager FMCG, noted that 40% of the alcohol market is currently in the shadows, which in monetary terms amounts to 12 billion hryvnias of the shortfall in the state budget. At the same time, the biggest hole in the system is the online sale of alcohol.

Christina Linichenko EBA Senior Manager FMCG
The SPTRs open new opportunities for the business. If the online store wants to operate legally and deliver products to you so that you can make a payment directly where you ordered it, it will be not possible for this store to use the physical PTRs which is tied to the exact marketplace address indicated in the respective license. Some clarifications can be added regarding the Law on Transactions and the Law on State Regulation of Alcohol. The possibility to pay for alcohol upon delivery should be a completely legal transaction so that every consumer can enjoy in full the benefits of the online stores. It is very important for consumers during a pandemic because with the SPTRs the courier can handle the check to the consumer at the time of purchase. Meanwhile, the entrepreneur will be able to avoid problems with the tax authorities. The SPTR is a new impetus for further positive changes. It cannot be abolished, otherwise, we will simply get stuck in the 19th century.

To support this opinion, Volodymyr Rudenko, Director of the Pharmacy Professional Association of Ukraine, emphasized that with the implementation of laws 128 and 129, the online sale of medicines will become legal. According to him, up to 10% of the turnover of medicines in Ukraine is counterfeit, 80% of them are sold via the Internet and through business entities without cash registers.

Volodymyr Rudenko
The introduction of full fiscalization for businesses engaged in the sale of medicines will strengthen control over the activities of online pharmacies. This will simplify the work of fiscal authorities and the state service of medicines due to the existence of accounting records. However, most importantly is that the end-users will be confident that they receive quality and safe drugs that will be accounted for in the manner prescribed by law.

Viktoriya Cherkach, General Director of the Association of Automotive Parts Importers and Distributors, estimated the overall share of at least 15-20% in the auto parts shadow market. For the most popular categories of auto parts, the share amounts to 50%.

Viktoriya Cherkach General Director of the Association of Automotive Parts Importers and Distributors
The total market of independent automotive components amounts to approximately 115 billion UAH of which the shadow market is 48 billion UAH. Thus, the state budget loses at least 25% (9-12 UAH billion annually) due to shadow transactions. This distorts the fair competition in the market as both domestic producers and official importers, who pay taxes in full, are not able to compete with entrepreneurs who sell goods without paying taxes or making minimal tax payments.

According to her, the abolition of the suboptimal fine of 1 hryvnia, the ability to receive electronic checks for the online purchase, and an innovative cashback mechanism are progressive rules that encourage buyers to receive a check and thus indirectly monitor compliance with the PTR legislation.

Sofia Araslanova, CEO of the Ukrainian Importers of Consumer Electronics Association, provided recent data on the e-commerce: an expert survey (conducted by GfK) showed that average gray imports account for 23% of total sales in 2019 for all categories of consumer electronics which in money terms is 20.5 billion UAH. Meanwhile, the budget shortfall amounts to more than 5 billion UAH solely due to the non-payment of import taxes and duties in 2019. As the sum up, Sofia provided an analysis of tax evasion schemes, which were recently presented by experts at the Institute of Social and Economic Transformation.

Sofia Araslanova CEO of the Ukrainian Importers of Consumer Electronics Association
According to the latest data, the volume of gray imports and smuggling reached up to UAH 320 billion per year, while the budget shortfall amounted up to UAH 96 billion per year. These figures can be compared with the last year′s report of the Institute of Social and Economic Transformation, they show that the smuggling is the most widespread illegal practice which remains relevant from year to year.

The participants of the press conference calculated that the total amount of the gray imports in each of their sectors (alcohol, electronics, auto components, medicines) is more than UAH 82 billion per year. The shadow sale in these four industries averages 30% of the total volume of smuggling and gray imports according to the Institute of Social and Economic Transformation.

So, we hope that the voice of business will be heard and quality decisions will be made!


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