Business Ombudsman Reports First Quarter 2019 Results

The Business Ombudsman Council today announced the results of its 2019 first quarter of operations. The Office received 408 complaints, a decline of 4% from the previous period, and closed 17% more cases – 277. The financial impact of operations accounted for UAH 187 mn. The Council met or exceeded the claimants’ expectations in 99% of cases, thus setting a historic record in terms of complainants’ satisfaction rate.
Ukrainian companies filed the majority of complaints (81%). Inquiries predominantly came from small and medium businesses (64%). The most active industries were wholesale (27%), manufacture (13%), real estate (10%), agriculture and mining (8%) and individual entrepreneurs (7%). 
Tax issues (55%), actions of law enforcement bodies (15%), malpractice by state regulators (8%), customs issues (7%) and local councils’ actions (4%) constituted vast majority of complaints. Compared to the previous quarter, companies filed 15% less tax appeals, with the main downfall recorded for tax invoices suspension, tax criminal cases and VAT e-administration. At the same time, tax inspections were seen as an increasingly problematic issue for companies doing business in Ukraine – the BOC received 93 claims challenging the results of tax inspections, which is an absolute maximum since launch of operations. 
As for law enforcers, the BOC received more appeals regarding actions of the National Police and the Prosecutor’s Office, while the number of complaints against the State Security Service had been decreasing for several consecutive periods. On a separate positive note, the number of reported cases on procedural violations by the National Police and the Prosecutor’s Office decreased by 15% and 33% respectively, as compared to Q4 2018.
Customs issues ranked fourth in the appeals ranking. Having looked deeper into this category, the BOC pinpointed some noteworthy trends in the customs area. Starting from Q2 2018, the number of customs complaints had been increasing, reaching an all-time high figure in Q1 2019. Since May 2015, the BOC received 202 complaints from business regarding malpractice of customs authorities. Over one third of them related to delays in customs clearance, and one third – to customs valuation of goods. It turned out that among companies, which filed complaints regarding customs services, the share of foreign (26%) and large companies (33%) was respectively 9 pp and 7 pp higher than on average. The level of successfully closed investigations was higher with respect to cases on customs issues (74%) than among all closed cases (67%). The BOC helped the complainants to return UAH 21 mn of customs overpayments – mainly the reimbursement of overpaid customs duties and cancellation of the value adjustment of imported goods.
There were several systemic wins of Q1 2019 based on the BOC’s recommendations to state agencies. As set forth in the BOC’s reports on international trade and customs, the Verkhovna Rada adopted in the 1st reading the draft law, which envisages the introduction of a new form of customs control – post clearance audit. This means that customs procedures will be applicable not at the checkpoint, but after the completion of customs clearance and release of goods into free circulation. Following the Council’s recommendations in construction sphere, the Cabinet of Ministers adopted comprehensive regulations, which define a required order of assigning postal addresses to new real estate objects. This should help to eliminate abuses and speed up the procedure as a whole. 
“Our first-quarter results show the continued progress in prompting a constructive change. Armed with experience and expertise, our team is focused on working closely with companies and state bodies, promoting business integrity and primacy of law to improve the business climate in Ukraine”, says Algirdas Šemeta, Business Ombudsman. 
The First Quarter 2019 Report is available here.