Social policy issues must be separated from business activities, – EBA

07/ 07/ 2020

In May, the Verkhovna Rada of Ukraine registered a Draft Law No.3515 on the regulation of the subsistence level and the establishment of preconditions for its increase. According to the explanatory note, the purpose of the document is to introduce a new methodology for calculating the subsistence minimum, based on which the main state social guarantees and benefits are established. At the same time, the document, which is designed to regulate the social sphere, provides for the regulation of business activities subjected to licensing such as the trade of alcoholic beverages. According to the draft law, the Cabinet of Ministers of Ukraine will be provided with the authority to determine the licensing fees. The fees will be reviewed annually together with the adoption of the draft budget. At the same time, there is no justified need to review the current system of fee determination for licenses, permits, administrative services, etc. and the transfer of the fee determination functions to the Cabinet of Ministers. Currently, the fees for licenses, permits, administrative services are clearly established by the respective laws, which, in turn, allows companies to ensure predictability and stability in doing business. The fee amount is constant and does not change from year to year, as it may happen in case the draft law No.3515 is adopted. For example, a license for the wholesale trade of alcohol currently costs 500 thousand UAH. Thus, the business community considers that the adoption of this draft law may lead to three key negative consequences. First, it will be difficult to predict the fee costs for licenses, permits, and administrative services. According to EBA experts, entrepreneurs, especially SMEs, currently include the payment of such fees when forming their budgets. If the fee costs, determined by the Cabinet of Ministers, appear to be too high, entrepreneurs will not be able to obtain certain administrative services or will be forced to seek additional financial income to ensure compliance with the law. Second, there is a possibility of increasing the volume of illegal production, particularly of alcoholic beverages, as the fines for illegal production could potentially be much lower than the established license fee. As a result, this situation will pose a threat to public health and may lead to a decrease in state budget revenues. Third, the draft law does not specify the criteria by which the Cabinet of Ministers will determine the licensing fee. Therefore, there is a potential risk that the decision to review the fee amount/fee cost will not be properly justified as it is made without the participation of such stakeholders as citizens, businesses, local authorities. Therefore, the European Business Association calls on the Verkhovna Rada not to adopt the Draft Law No.3515 as one that intends to regulate two completely unrelated areas without justifying the importance of these changes. According to business, it is important to properly elaborate on the need for such changes, and only then implement them in the respective provisions of the draft law, so that not to make amendments to the already adopted law.

At the same time, the document, which is designed to regulate the social sphere, provides for the regulation of business activities subjected to licensing such as the trade of alcoholic beverages.

According to the draft law, the Cabinet of Ministers of Ukraine will be provided with the authority to determine the licensing fees. The fees will be reviewed annually together with the adoption of the draft budget. At the same time, there is no justified need to review the current system of fee determination for licenses, permits, administrative services, etc. and the transfer of the fee determination functions to the Cabinet of Ministers. Currently, the fees for licenses, permits, administrative services are clearly established by the respective laws, which, in turn, allows companies to ensure predictability and stability in doing business. The fee amount is constant and does not change from year to year, as it may happen in case the draft law No.3515 is adopted. For example, a license for the wholesale trade of alcohol currently costs 500 thousand UAH.

Thus, the business community considers that the adoption of this draft law may lead to three key negative consequences.

First, it will be difficult to predict the fee costs for licenses, permits, and administrative services. According to EBA experts, entrepreneurs, especially SMEs, currently include the payment of such fees when forming their budgets. If the fee costs, determined by the Cabinet of Ministers, appear to be too high, entrepreneurs will not be able to obtain certain administrative services or will be forced to seek additional financial income to ensure compliance with the law.

Second, there is a possibility of increasing the volume of illegal production, particularly of alcoholic beverages, as the fines for illegal production could potentially be much lower than the established license fee. As a result, this situation will pose a threat to public health and may lead to a decrease in state budget revenues.

Third, the draft law does not specify the criteria by which the Cabinet of Ministers will determine the licensing fee. Therefore, there is a potential risk that the decision to review the fee amount/fee cost will not be properly justified as it is made without the participation of such stakeholders as citizens, businesses, local authorities.

Therefore, the European Business Association calls on the Verkhovna Rada not to adopt the Draft Law No.3515 as one that intends to regulate two completely unrelated areas without justifying the importance of these changes. According to business, it is important to properly elaborate on the need for such changes, and only then implement them in the respective provisions of the draft law, so that not to make amendments to the already adopted law.