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"We call on new authorities to boost the fight against raidership", Business Ombudsman Marcin Święcicki

07.11.2019

The Business Ombudsman Council received 428 complaints from businesses concerning malpractice of government agencies, which is 8% more than in the previous period. The financial impact for the quarter amounted to UAH 564 mn. and since launch of operations it already exceeded UAH 17.6 bln. The vast majority (95%) of complainants mentioned in their feedbacks that they were satisfied with our professional facilitation. 

Ukrainian companies filed the majority of complaints (87%), while enterprises with foreign investments – lodged only 13% of appeals. Inquiries predominantly came from small and medium businesses (70%). The most active industries were wholesale (28%), manufacturing (14%), real estate (8%), agriculture and mining (8%) as well as individual entrepreneurs (9%). Almost a half of appeals (49%) came from Kyiv and the oblast.

Five main subjects of complaints constituted 89% of all complaints received:

•    Tax issues (62%). Most often companies have sought assistance in challenging results of tax audits and VAT invoices suspension. Electronic administration of VAT was the third most common tax issue for businesses. Complaints concerning initiated tax criminal cases, albeit at a slower pace, also increased in comparison with the previous period.
 
•    Actions of law enforcers (10%). A positive trend for the second quarter in a row is that companies have been lodging less appeals concerning actions of law enforcement bodies. In particular, the Council received fewer cases of procedural abuse and inactivity of law enforcers, as well as 
unreasonable criminal cases against businesses. We received fewer complaints regarding the National Police and the Prosecutor's Office, while the number of appeals related to the State Security Service remained fairly low. 

•    Actions of state regulators (7%). Businesses complained less about the State Architectural and Construction Inspectorate, but more about the Antimonopoly Committee.
 
•    Customs issues (6%). We noticed an increase in the number of complaints on customs issues as compared to both Q2 2019 and Q3 2018. This was driven by an increased number of appeals regarding delays in customs clearance of goods. At the same time, the number of complaints about adjusting the customs value and refunding overpaid duties decreased. 
 
•    Actions of the Ministry of Justice (4%). Businesses complained more about malpractice of state registrars, that is why we decided to dedicate a separate section of the report to raidership.
 
"Since launch of operations the Council received 108 complaints about malpractice of state registrars. It is less than 2% of the total number of appeals, but the mere fact a business may be taken over in Ukraine is very intimidating for Ukrainian and foreign investors. The Council systemically analyzed the issue and presented 22 recommendations to government agencies. Only one third of them has been implemented, so we call on new authorities to boost the fight against raidership", said Marcin Święcicki, Business Ombudsman. 

State bodies have implemented 91% of the Council's case-by-case recommendations. Among implemented systemic recommendations is cancellation of mandatory fee: 4% equity contribution for the development of the locality’s infrastructure from the cost of housing construction and 10% of non-residential construction. In addition, as recommended by the Council, the threshold amount of actual tax sums due to be paid to the budget triggering treatment of such action on the part of a taxpayer as a criminal offence was increased. These changes should relieve pressure on business by reducing the number of unreasonably initiated criminal proceedings under Article 212 of the Criminal Code of Ukraine. 

Read the report