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“The more complaints companies submit, the more state processes will be consequently improved”, Business Ombudsman

06.02.2020

In Q4 2019, the BOC received 412 complaints and closed 249 cases. The institution helped companies to refund UAH 347 mn, reaching the total financial result of UAH 17.9 bn since 2015. Apart from it, the BOC facilitated companies in ceasing dozens of episodes of malpractice by state bodies, obtaining licenses and permits, as well as closing unreasonable criminal cases. 

Trends of appeals. Four blocks of complaints (tax issues, actions of law enforcers, state regulators and the Ministry of Justice) made up 86% of all business appeals:

•    Tax issues (62%). This biggest group of complaints decreased by 4% from the previous quarter. Entrepreneurs complained less about results of tax audits, unreasonable tax criminal cases and discontinuation of VAT payers’ status registration. The only matter which was up is the suspension of tax invoices. Many companies complained about getting on the list of high-risk tax payers without any explanation provided.

•    Actions of law enforcers (12%). With respect to law enforcers’ actions, a trend of appeals varied depending on the state body. Businesses complained more about procedural abuse and inactivity of the National Police, as compared to the previous quarter. The number of appeals concerning initiated criminal cases by the State Security Service was also up. On the contrary, companies lodged fewer complaints regarding procedural abuse and initiated criminal cases by the Prosecutor’s Office. 

•    Actions of state regulators (9%). Complaints regarding malpractice of state regulators went up, as compared to both Q3 2019 and Q4 2018. 

•    Actions of the Ministry of Justice (3%). At the same time, total appeals on the Ministry of Justice went down, although complaints concerning enforcement and registration issues performed opposite trends.

The prevailing majority (84%) of complainants were Ukrainian companies. Appeals were predominantly coming from: wholesale and distribution (27%), manufacturing (16%), individual entrepreneurs (10%), real estate and construction (10%), as well as agriculture and mining (8%). Over one third of appeals (39%) came from Kyiv.

Cooperation with state bodies. Altogether, state bodies implemented 91% of case-by-case recommendations, issued by the Council, and 38% of systemic ones. To maintain a constructive dialogue with state bodies, the BOC signed Memoranda of Partnership and Cooperation with the Prosecutor General's Office, State Tax Service and State Customs Service. These documents imply consideration of the most complex cases within joint expert groups with representatives from both the state authority and the Council. 

“Together with Heads of these state bodies we hope that signed Memoranda will help to reach our common goal – improving public officials’ service standards for the benefit of business. The more complaints companies submit, the more systemic problems we can identify and the more processes will be consequently improved”, stressed the Business Ombudsman Marcin Swiecicki

Systemic wins. Following the BOC recommendation on customs issues, in order to ensure protection of intellectual property rights while moving goods across the Ukrainian border, the Verkhovna Rada introduced respective amendments to the Customs Code of Ukraine. As set forth in the Council’s report on raidership, to prevent carrying out registration actions in violation of territoriality principle, the Verkhovna Rada introduced the law known as the Anti-Raidership Law 2, which effectively reinstated territoriality as one of the principles of state registration of rights. Both laws became effective in Q4 2019.

New systemic report on SMEs. Over two thirds of appeals (72%), received by the Council since launch of operations, were lodged by small and medium-sized enterprises (SMEs). Given the importance of SMEs complaints in the portfolio, the BOC devoted its 15th systemic report to evaluating the implementation of the State SME Development Strategy 2020 and shaping conclusions for the future. In the analysis, based on statistical data and results of focus-groups research with entrepreneurs from various Oblast of Ukraine, the BOC addressed issues of excessive control by tax authorities, necessity to improve the labor legislation, promoting exports and simplifying access to finance for SMEs. The BOC stressed the importance of the SME Development Office and the role of local authorities to implement sound regulatory policies to facilitate development of SMEs. These systemic recommendations are expected to be used for further comprehensive analysis of the SME 2020 Strategy implementation measures and elaboration of state policy directions for SMEs.

Government Commission on Business Protection. The BOC was invited to become a member of the newly established Government Commission on Business Protection, led by the Prime Minister. During two sessions in Q4 2019, the Commission reviewed several cases selected from those previously investigated by the BOC, but at the same time particularly important for the Ukrainian business climate.

A full version of the quarterly report in Ukrainian and English is available here.