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Results of 2016: Annual Business Achivements

21.11.2016 Analytics News

The outgoing   2016 was  hard, and not only for business but also for the country in general. It was really difficult but not  fatal: a new tax policy, the integration into the European market, difficulties of investment and many other things. There are  key factors which have affected the development of a business industry much but are contrary according to the news in the Ukrainian media which become multicoloured with such slogans as” fall, closing and the termination”. The experts continue to go on about hope for the growth of the economy and the prospect of  majority   production spheres development.

Tax policy

Basic

The changes which have come into force at the beginning of 2016 concerning the structure of   taxpayers system (they formed new 4 taxpayers groups) and also enhancement of VAT and other taxes   administration system, as well as ought to be, at first caused a number of difficulties in business. First of all, this electronic administration is toughening of  the electronic reporting submission rules and complexity with   a new system usage. However,  the government has implemented the task in hand. It is possible to state the first positive results: the debt of the state on a VAT return decreases,but in slower rates than was planned.

The Ministry of Finance claims that payments of the VAT became more transparent and have  increased practically by 30% in comparison with previous year. About 35% of a VAT return have already paid to business. At first sight, a figure is small, but it has been much more than for last year. The urgent and demanded “manual” mode of a VAT return by means of claims, lawsuits and other legal mechanisms still have remained  in minus. Therefore business continues to spend forces and energy for the whole headquarters of attorneys, lawyers and accountants who prepare tens of claims and addresses in a week. By the way, the Ukrainian entrepreneurs adequately endured an increase in rates.

Additional

The government, in addition to already mentioned  positive changes, developed the new bill which offering:

  • more advanced administrations are a creation of the functioning electronic office;
  • a bigger pressure decrease on business from tax authorities influences on liquidation of tax policy;
  • a delegation of power on conducting checks from places on the regional level;
  • entering of the tax holidays for small and medium business for up to 5 years;
  • an alternative model of a simplified taxation system.

At the same time, this bill suggests to increase considerably rates of excises and to establish a single rate of an excise on diesel fuel. However, all rates of the main taxes will remain at the level of the current year.

The most pleasant

  • The fact that there will be a penalty fee in the amount of 120% of a discount rate of the NBU for delay of return to the payer mistakenly or the means which are excessively paid to the budget, perhaps, the most pleasant for tax specialists.
  • Positive assessment has as well the new law on debt restructuring of the entities which allows to smooth consequences of the financial crisis and to avoid bankruptcy by legal methods.
  •  NBU aims to regain the trust of business and to help to be recovered: interest rates this year decreased three times. Last time the rate was lowered to 15% in September.

The procedure of operating is considerably simplified by a money of the entities. The numerous seminars and round tables which are carried out with the participation of business representatives  testify to one: business structures approved the offered changes.

Export

Commodity export as the direction which  doesn’t lose the relevance for the Ukrainian business and remains to one of the most discussed subjects in business media. Unfortunately,  the Ukrainian export at the moment of 2016 in Ukraine  has decreased by 10%. However, the tendency concerned not all industries. The basis of the Ukrainian export is constituted today by raw materials and products of the minimum technological border. The agricultural sector also  gained the steam.

The mechanical engineering is in decline here: export continues to decrease.

Achievements and defeats

For the national business increasing in export to EU countries is indicative: increase practically has grown by 5% in comparison with the same period of last year. However, in October the tendency began to weaken. Export of grain and oil-bearing crops was reduced. From the quotas for duty-free importation of products provided to Ukraine in the EU, only such line items as grain, cereal products, flour, honey, oil are exhausted and much of them were spent for the first 2-3 months 2016.

Deliveries to the EU of vegetables and berries from Ukraine, chicken meat (by 44%) and dairy products have grown (practically by 8 times). In other spheres, there are meats (beef, pork, mutton), eggs. The situation remains deplorable. For example, export of pork to Ukraine has fallen practically by 20 times. These results show the fact that goods of the Ukrainian production often don’t conform to the quality standards of Europe. It is just unacceptable. There is no fault of the Ukrainian producers here. The issue of coordination of the Ukrainian and European legislation in this area hasn’t been resolved yet. The government declares that there is no opportunity to finance purchases of the foreign equipment to carry out expertize of researches.

Export with the CIS countries has decreased almost by 28%. However,  the situation is clear here: Russia hold the considerable market share. The question is raised by a decrease in the level of export with Belarus (5%) and Kazakhstan (45%).

Investments

The investment climate in Ukraine has been in a depression condition for a long time. However,  in 2016 the first obvious shifts in this sphere  were planned after the protracted crisis caused by the military conflict in the east of the country.

First, the situation in Donbass was a little stabilised, and secondly, the state took the first steps in the large-scale program for fight against corruption:

  • electronic databases,
  • electronic administration of taxes,
  • the openness of electronic various rights registers,
  • carrying out reforms in GFS, prosecutor’s office, police and courts,
  • electronic declarations.

All this, of course, returns interest of investors in opportunities of our country.

What Ukraine attracts with

Foreign investors actively put resources in the system of energy saving, agrarian sector and a construction. There were also new interests. It is a  sugar industry. At the beginning of November, the Anti-monopoly committee of Ukraine permitted to take 25% of shares of Astarte agricultural holding to the  Fairfax Canadian financial group.

The interest of investors considerably has  increased also in the sphere of hotel business and tourism. At the beginning of September, it was said that until the end of this year in Ukraine three international networks of hotels have been opened: Sheraton, Ibis and Aloft. Chinese investor of HomeInns & Hotels Management Inc. redeemed the well-known Lybid Kiev hotel , and which it is planned to turn into the budget project.

By results of the second quarter 2016, the Euro Rating agency has named  the cities with the highest investment activity. Leading line items during many seasons aren’t handed over by Kiev, behind  are  Vinnytsia and Kharkov. Other cities, perspective for investment, were among Odessa, Nikolaev, Zhytomyr, Lvov, Ivano-Frankovsk, Dnepr, Poltava and Ternopol.

Following the results of the III quarter, the investment into Ukraine has grown practically by 1 billion  dollars in comparison with the first and second quarters.

The contradictory and encouraging forecasts

It should be noted that the Ukrainian power is more optimistic about the growth of economy and business development next year. The international structures and financial analyst companies are included too. However, what is important: both those and others speak about the growth of the economy, though give different numbers. For example, Vladimir Groysman declared about expected economic growth of  3% in the 2017 year.

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