EBA Meeting with the Minister of Finance of Ukraine
Yesterday, April 23, the EBA business community met with Serhii Marchenko, Minister of Finance of Ukraine. The meeting was held in Q&A format; therefore, it was possible to cover a wide range of issues within the one-hour conversation.
Thus, Mr. Marchenko said that the state budget revenues have already reduced by almost 120 billion UAH in 2020. According to recent changes to the state budget for this year, the budget deficit limit was extended to UAH 298.4 billion, which is 7.5% of GDP. The Ministry plans to finance the deficit through external sources and considers the situation to be under control.
At present, there is a discussion at the government level on possible tools to support the business most affected by the lockdown. It should be noted that state support is mainly designed for small and medium-sized businesses. These include the 5-7-9 credit program, which was recently extended, and the refinancing of outstanding loans and portfolio guarantee mechanism. At the same time, the Ministry will not consider the proposal to exempt legal entities from payment of the single social security tax for the quarantine period, in order not to deepen the pension fund deficit. Instead, the Ministry for the Development of Economy, Trade and Agriculture, and the Ministry of Social Policy are developing an unemployment support package that will help the employees of companies that were forced to close .
In order to support businesses and revitalize economic activity in Ukraine in the long run, the Ministry plans to make significant changes to tax legislation. A separate working group under the Ministry will be created to develop economic incentives for business development. The group will also include experts, business representatives, and a member of the European Business Association.
Regarding emission instruments, Mr. Marchenko said that currently it is not planned to use such measures. At the same time, he noted that there was another area for more constructive interaction between fiscal and monetary authorities. The Ministry also welcomes the decision of the National Bank to reduce the interest rate to 8%, which will allow the economy to obtain cheaper loans.
The business community is grateful for the cancellation of some penalties during the quarantine. Also, it was reassured that the fines are not the ultimate aim of the authorities. For example, regarding the cancellation of penalties for late registration of VAT and excise invoices, the Ministry took an obligation to provide additional clarification. At the same time, the Ministry is not going to cancel penalties for violating rules of fuel and ethyl alcohol sales and stock accounting, although they will return to this issue in case the quarantine is extended.
Similarly, the Ministry of Finance does not plan to introduce a system of consolidated payment of income tax by enterprises of one group, in order to prevent tax fraud and evasion.
The business was also concerned about a delayed signing of the adopted draft Law No. 1210, which regulates the issue of penalties according to the wishes of the business. Mr. Marchenko assured that, if necessary, the Ministry would prepare an alternative draft law, taking into account proposals from the European Business Association in the framework of the working group to be set up.
Ministry representatives said that issues of the Provisional Register for the reimbursement of old VAT amounts remain on the agenda and will be resolved gradually after verifying the details on the formation of each amount in order to avoid compensation for fictitious transactions.
The business expects the Ministry to assist in accelerating the approval of amendments to the NBU Board Resolution №148, which would simplify the cash withdrawal at retail outlets.
The European Business Association will also appreciate if the Ministry of Finance considers some problematic issues, as well as proposals from the business community to facilitate work conditions for companies during the lockdown, in particular, detenization of the economy and vulnerable areas of the business, regulation of the introduction terms of the new excise tax mark, local tax administration involving local authorities, revision of the current regulation on the rent for the use of the radio frequency resource, opportunities for B2B loans, loans for local budgets and other proposals that the EBA will submit to the Ministry for further study.
The European Business Association is grateful to the Minister and his colleagues for their time and attention to the business community. We sincerely wish Mr. Marchenko much success in his new position!