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Business news from the Ukrainian League of Industrialists and Entrepreneurs

AIR EXPRESS NATIONAL PROJECT NOW UNDER INFRASTRUCTURE MINISTRY MANAGEMENT

KYIV. June 23 (Interfax-Ukraine) – The Air Express National Project to construct a high-speed passenger rail service between Kyiv-Pasazhyrsky railway station and Boryspil International Airport has been transferred to the management of the Infrastructure Ministry of Ukraine.

This is stipulated in cabinet resolution No. 418 of June 17, 2015.

The Air Express national project is funded by China EximBank. The total loan amounts to $372 million. The loan will be issued in two tranches.

The first tranche of $52 million was released in 2013 and was aimed at design and preparatory work. The second tranche of $320 million will be used for the construction of infrastructure.

Acting Deputy Director General for Operations at Boryspil airport Anton Borysiuk said in December 2014 that it was unlikely that the initial stages of the Air Express project would have created high passenger demand.

In April 2015 Infrastructure Minister Andriy Pyvovarsky said that the project is economically unjustifiable.

In June 2015 it was reported that Ukraine and China are willing to discuss the possibility of redirecting loan funds provided for the project.

According to Pyvovarsky, the feasibility of the Air Express project has not been confirmed, therefore the ministry is ready to propose alternative projects that can be funded using Chinese money.

 

AUTOMATED RETURN OF OVERPAID TAXES SHOULD BE PART OF TAX REFORM – AMERICAN CHAMBER OF COMMERCE IN UKRAINE

KYIV. June 23 (Interfax-Ukraine) – The automated return of overpaid taxes and the possibility of allocating overpayment for one tax to another tax should become part of tax reform in Ukraine, according to 73% of respondents polled by the American Chamber of Commerce in Ukraine.

The Chamber said that respondents formed concrete proposals on their key expectations from comprehensive tax reform.

Out of those polled, 66% of respondent said specialists of fiscal agencies should have their wages increased and staff should be optimized, combing pecuniary and non-pecuniary incentives. 63% of respondents believe that the quality of tax consultations should be improved. 61% of respondents proposed that the financial responsibility of tax agencies for groundless decisions should be introduced, as well as compensation of court expenses if the court issues a ruling in favor of taxpayers. The introduction of the alternative dispute resolution should also be discussed.

In addition, 58% of respondents said that the fiscal service should be reorganized into a servicing agency, authorizing it with supervision over the observation of tax laws. 50% of respondents said that the electronic declaration of all taxes should be introduced and reporting periods should be extended, as well as report forms being facilitated.

Of those polled, 74% of respondents said that the tax reform should provide for predictability of the tax policy and stability of tax laws. 73% of respondents believe that the requirements of tax laws should be watertight. 63% of respondents support the observation of a clear procedure for drawing up new tax laws, and 53% of them said that the administrative and fiscal burden on taxpayers should be registered via public presentation of the model at the stage of its discussion.

The key remarks of business to taxes foreseen in the current tax system first concern value added tax (VAT, 84% of respondents), company profit tax (60% of respondents) and single social security tax (58% of respondents).

“Most of respondents believe that first the administration of taxes should be relaxed, taking into account European principles. The electronic services should be introduced and the single social security tax rates should be cut,” the Chamber said.

UKRAINE, CANADA TO SPEED UP FTA TALKS

KYIV. June 22 (Interfax-Ukraine) – Ukraine and Canada will speed up the talks concerning the formation of a free trade area between the two countries.

Ukraine’s President Petro Poroshenko and Canada’s Prime Minister Stephen Harper discussed the issues of bilateral cooperation during a phone conversation, and agreed to speed up the process of negotiations on the formation of a free trade area, the Ukrainian president’s press service reported.

“Petro Poroshenko and Stephen Harper emphasized that the establishment of the FTA between Ukraine and Canada would become a positive signal for investors and business in the two countries, as well as enhance bilateral relations,” the statement reads.

According to the report, Harper praised the efforts of the Ukrainian authorities and Poroshenko in particular on the path to the reformation of Ukraine. “The prime minister of Canada has assured of his willingness to assist in mobilizing international political and economic support for Ukraine,” the press service said.

Poroshenko thanked Harper for his visit to Ukraine ahead of the G7 Summit. “It was a successful and symbolic visit, which demonstrated solidarity of Canada and the international community with Ukraine,” the head of state noted.

The Ukrainian president informed the Canadian premier about the results of the meeting with the Ukrainian support group, which was established under the G7 leaders declaration, at the level of ambassadors and diplomatic representatives.

SAAKASHVILI PLANS TO TURN ODESA INTO LARGE BLACK SEA HUB

NEW YORK. June 22 (Interfax-Ukraine) – Head of Odesa Regional Administration Mikheil Saakashvili has pointed at out the good potential position of Odesa City as a regional transport, logistic, tourist and IT hub in the Black Sea region, and said he plans to realize this potential.

Odesa has many advantages, in particular, well-educated and talented people, and stunning tourist potential, he said.

“We would provide investors with protection from extortion and blackmail, which have been hindering economic growth so far,” he said at the Ukrainian Investment Day conference organized by Concorde Capital Investment Company in New York on June 19.

Saakashvili added that Odesa airport has also good prospects.

The governor said he plans to create as favorable as possible conditions for business and attracting investment, irrespective of volume. Electronic registration will be introduced, easy land provision will be ensured, and the police, customs and tax services’ operation will be radically changed.

“These will be first pilot projects in Ukraine,” he said.

Saakashvili highly assessed Ukraine’s investment prospects. He said that when he was president of Georgia, his country passed through war and embargo, however thanks to a policy of growth its economy exhibited two-digit figures.

He said Ukraine currently has several advantages: a new generation of people, democracy and a developed civil society, de-communization, a high level of education and a low workforce cost

“Ukraine is Europe’s China,” he added.

CENTRAL BANK PROJECTS ECONOMIC GROWTH AS OF JULY – GONTAREVA

NEW YORK. June 22 (Interfax-Ukraine) – The Ukrainian economy will start recovering as of the second half of the current year, according to Governor of the National Bank of Ukraine (NBU) Valeriya Gontareva.

“We believe that the growth will start in the second half of the year, perhaps as early as this quarter,” she said during a video conference at the Ukrainian Investment Day event organized by Concorde Capital in New York on June 19.

The situation remained stable on the financial market in the past four months, and deposits have started coming back to the banking system, including due to decent interest rates offered by the NBU on its deposit certificates, she said.

Most of Ukraine’s largest banks have already fulfilled their capital increase targets set until July 1, 2015 after last year’s stress tests, she added.

“However, the stabilization won’t be sustainable without GDP growth,” she underlined.

She acknowledged that one of the means to achieve the stability on the market were “draconian” administrative restrictions.

“We’ve agreed with the International Monetary Fund a gradual plan, a road map of how we will be lifting them,” she said.

She also said that targeting inflation is a priority for the central bank. “Right now this year we have a monetary regime of money supply, but our main idea is, of course, inflation targeting, “she said.

At the same time, she said, this transition is possible only under certain conditions, namely, the stable situation in the country. “But we still believe that, as it is envisaged in our EFF [Extended Fund Facility] program, in 12 months we will start to do our inflation targeting, and right now we are preparing instruments for this inflation targeting,” she added.

CABINET SHOULD DRAW UP ALTERNATIVE OPTIONS TO SUPPORT AGRICULTURE IF TAX BENEFITS REVOKED – ULIE

KYIV. June 22 (Interfax-Ukraine) – The Ukrainian League of Industrialists and Entrepreneurs (ULIE) insists on a balanced approach towards revoking tax benefits for farmers and on drawing up alternative options to support agriculture.

“The government should draw up alternative options to support agriculture and synchronously hold talks with the IMF on mitigation of the conditions of cooperation with the fund,” reads a ULIE report, citing League Chairman Anatoliy Kinakh.

He said the government has not offered any alternative ideas on improving the development of agriculture, while state support of agriculture in Ukraine totals dozens of times less than what farmers in the EU receive.

Kinakh said that the alternative to tax benefits, specifically targeted subsidies for farmers, is complicated, as firstly the system should be drawn up and formalized in legislation.

“Then the issue of distribution of subsidies will arouse, and the human factor will play a large role and corruption risks will appear. It is hard to calculate how much money would really go to farmers,” he said.