On the path to European integration: Overview of reforms for third quarter of 2022
Over the past three months, Ukrainian officials have adopted almost fifty important changes in the environmental and economic sphere (Photo:nextvoyage / pixabay.com)
Ukraine received candidate status to join the European Union in June, and since July it has been speeding up its reforms and efforts to get closer to the EU. In three months, Ukraine ratified the Istanbul Convention, received transport and customs “visa-free” regime, and brought a number of Ukrainian laws into line with European regulations. In total, in three months, the authorities adopted almost fifty important changes in the environmental and economic spheres. Among them, however, were two “anti-reforms”: tax and customs benefits for industrial parks. Such “kindness” currently does not benefit the country, as it reduces tax revenues to the budget and does not guarantee future economic growth.
NV is here publishing material by Kseniia Alekankina, a senior analyst of the Reform Monitoring Index. Article, which was provided by Vox Ukraine.
The ratification of the Istanbul Convention was an important step towards adopting European approaches to the protection of human rights. Countries that ratify it undertake to criminalize gender-based violence and collect statistics on such crimes in order to monitor trends and threats in this area. Such crimes include forced marriage, forced sterilization, stalking, etc.
Ukraine took over 11 years to ratify the convention, which it signed in May 2011, and achieving ratification was pretty tough. The Ukrainian Council of Churches and Religious Organizations stood in the way, pointing out the use of the term “gender” as a key threat to “traditional values” and argument against use in Ukrainian schools and universities to popularize same-sex relationships. The full-scale war with the Russian Federation, however, showed the need for faster rapprochement with the EU, and helped the authorities to distinguish right from wrong in the field of human rights protection.
The second key decision, which, according to experts, significantly moved Ukraine forward, was the Agreement on “transport visa-free” regime with the EU (agreement on road freight transport). With the suspension of air and sea connections with Ukraine as a result of a full-scale attack by the Russian Federation, the role of road transport increased, and bureaucratic obstacles and delays at customs began to cost even more. Now, Ukrainian carriers no longer need to obtain separate permits for bilateral and transit transportation through EU countries. Another positive outcome of the reform is that Ukraine and the EU will mutually recognize driver’s licenses issued by either of the parties, so Ukrainians no longer need an international driver’s license to drive a car in the EU.
In the third quarter, two laws received negative reviews from experts. Both involve attempts to prop up dubious “growth spots” instead of creating fair rules for all businesses in the country.
These are the laws on tax and customs benefits to create favorable conditions for the activity of industrial parks. They provide exemptions from paying income tax for 10 years, if the enterprise has have the status of an industrial park participant for at least 10 years, and exemption from paying VAT when importing equipment for the use in an industrial park. However, there are nuances: in order to use the benefits, one would need to use the saved funds for development within the industrial park, and after purchasing the equipment without VAT, one must stay in the park for at least five more years – otherwise, one will have to pay back the “saved” taxes plus interest.
Given the uncertainty in Ukraine, these conditions may significantly reduce the attractiveness of investment for businesses. Another problem is the reduction of budget revenues when the state critically needs them. Meanwhile, in business surveys, entrepreneurs more often indicated among the key obstacles to investing in Ukraine not the tax burden, but mistrust of the judicial system, corruption, and the great influence of oligarchs and monopolies. Therefore, for the growth of the economy, it is much wiser to solve these problems, rather than “play around” with tax rates.
Changes in key areas
The reform index tracks regulatory changes in six areas: public administration, public finances, monetary system, business environment, energy, human capital. In the third quarter, each of them moved forward.
The greatest progress was made in the areas of “Business environment”, “Human capital” and “Public administration.”
Source: 185-188 issues of the Reform Index.
In addition to the above-mentioned transport “visa-free” regime, we have recorded several other important changes in this area.
Customs and trade European integration. The Verkhovna Rada has voted for three laws that allowed Ukraine to obtain a customs visa-free regime, namely the country’s accession to the Convention on the Simplification of Formalities in Trade in Goods, accession to the Convention on the Common Transit Procedure with the EU, and also the law amending the Customs Code with corrections necessary for the coordination of customs issues and the development of a bilateral trade environment. As a result of their adoption, Ukrainian customs will be able to exchange information in real time with other countries that use the New Computerized Transit System (NCTS); also, one transit declaration (which is suitable for both export and import, and for transit) and one guarantee will be enough for the transport of goods between signatory countries.
Adjusting environmental legislation to European standards. The Waste Management Act creates a waste management hierarchy similar to the European one. These are, in order of priority, waste prevention, reuse, recycling, recovery (energy production), and waste removal. The law also establishes the “polluter pays” principle, which should encourage producers to switch to more environmentally friendly ways.
Construction. To speed up the reconstruction of Ukraine, the government adopted a resolution on simplifying permit and registration procedures for the construction, overhaul and reconstruction of buildings. According to it, for structures with a height of up to two floors, construction can take place without a construction passport, provided that the intended purpose of the plot is observed and the plans for the development of the land plot are uploaded to the Unified State Electronic System in the Field of Construction (EDESSB).
Another resolution adjusting the procedure for conducting the EDESSB created an opportunity to electronically submit plans for the comprehensive restoration of the territories, as well as to create requests and receive a response about the possibility of placing evacuated enterprises or facilities for the residence of internally displaced persons in certain territories.
Legislators also finally worked out the process of registration of ownership rights to housing in unfinished buildings, the specifics of mortgages and deeds for it. Now, all future apartments in buildings under construction must be registered in the register of property rights of the Ministry of Justice as a separate object of property rights, and the developer will get the right to sell them only if he has all the permits.
In the summer, the authorities did a lot of fruitful work on the current regulations of the labor market. The so-called freelance law was passed, which regulates work without fixed working hours, but with a fixed number of tasks. It protects the rights of freelancers, fixing their right to work with several employers at the same time. According to it, a freelancer must work at least 32 hours a month. If the freelancer works less time, or there was no work at all, they will still receive payment for the specified 32 hours. A nuance of the law: companies with up to 250 employees can hire freelancers, and the number of freelancers should not exceed 10% of the staff. Two more laws in this area are designed to regulate the issue of military personnel.
Due to the ongoing full-scale war, many enterprises have not been able to continue paying salaries to employees who have become military personnel. The new law abolishes the need to keep the average salary for absent servicemen (while keeping a place for him or her), and also specifies that in case of delays in the payment of wages, the employer is obliged to pay it no later than six months. The list of reasons for the termination of employment relations also increases: the impossibility of providing the employee with working conditions as a result of the destruction of the company’s property as a result of hostilities, the absence of the employee at work and any information about such absence for four months, or the death or declaration of absence of the FOP that uses hired labor.
Lawmakers also took care of the rehabilitation of servicemen after returning from the war. The law on the system of transition from military career to civilian life specifies that war veterans and families of deceased veterans have the right to social and professional adaptation. The Interdepartmental Working Group is currently working out the details of it.
Culture. To counteract the influence of the Russian Federation on the cultural front, the authorities passed a law on support of the national musical product, limiting the public use of the musical product of the aggressor state. It introduces a ban on tours by Russian citizens, as well as on the public performance of their videos and music. Meanwhile, a list of performers who condemn aggression against Ukraine and who will be exempt from these restrictions is in the works.
The law also increases the share of the Ukrainian language on airwaves: on television – at least 50% of content must be in Ukrainian, on radio – at least 75% of the broadcast time, and at least 40% of music in Ukrainian.
Another problem that this law addresses is “acoustic violence” in public transit. Drivers of regular passenger buses and minibuses are prohibited from “playing music, movie sounds or other sounds in the bus cabin, except for information about the trip”. The same prohibition applies to passengers: a violator who listens to music through speakers may even be made to leave the vehicle.
State property. In order to speed up the process of finding private owners for state-owned enterprises and increase budget revenues, the authorities have adopted a law on privatization, which allows the formation of pools from several privatization objects and the sale of property without an audit, inventory and assessment. One of its key benefits is the reissue of permits and licenses for the conduct of certain types of activities to the buyers until the end of their validity period, which will significantly speed up the start-up of privatized enterprises. During the war, large-scale privatization (objects worth more than UAH 250 million) is prohibited, as is the privatization of property located in or near the war zone.
The state also decided to hand over water supply and sewerage enterprises to communities free of charge if they are ready to use them for their intended purpose and not sell them into private ownership.
Digitalization. In the third quarter, Ukraine continued to move towards a “digital state” concept. The authorities decided to expand the list of services that can be obtained through the Diya app – for this purpose, the government developed a universal algorithm for providing such services. This aims to reduce the “human factor” and opportunities for corruption in the interaction of citizens with the state.
To speed up bureaucratic procedures for Ukrainians abroad, the government has identified 57 countries with which it is possible to electronically exchange documents with citizens’ personal information.
In order to ensure the protection of data on the websites of state bodies and in registers, the holders of state information resources were allowed to conclude agreements on technical administration with foreign providers of cloud services, while also obliging them to create backup copies of data on physical media to ensure their safe storage (for example, in Ukrainian embassies abroad).
The “cherry on top” of these reforms was the new law on official statistics, which was based on the EU framework regulations. It gives the State Statistics Service the right to receive administrative data on Ukrainians and legal entities from other authorities, which significantly reduces the reporting pressure on respondents. The law also creates prerequisites for the development of the information system of state statistics bodies and its integration with the information systems of other authorities. In addition, the law regulates the issue of access to microdata for research purposes, which has long been the focus of Ukrainian scientists and researchers.
Who is the greatest reformer?
In the third quarter of 2022, the Verkhovna Rada was the leader in adopting reforms with 23 regulations, followed by the Cabinet of Ministers with 16 initiated laws and adopted resolutions. Six reforms initiated by the President, and two important resolutions were adopted by the National Bank of Ukraine.
Source: 185 — 188 issues of the Reform Index.
In the third quarter, Ukraine demonstrated a confident desire to harmonize its legislation with European one. This is a necessary but yet insufficient step for further European integration. After all, the judicial system, which has already become all too infamous for both Ukrainian society and European diplomats, remains unreformed until now.
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