OREANDA-NEWS. December 02, 2010. M. Azarov - Dear Members of the Government, dear invited! As you know, the President of Ukraine declared that he vetoed the tax code.

I want to inform our citizens that this is common position of the President and the Government.

On Monday, the Government considered the issue of the Tax Code, formed a position, and I brought this issue to the attention of the President.

What it that?

First. The current tax system hampers Ukraine economy modernisation and its rapid development while creates conditions for a large part of the shadow economy activities, and therefore the state budget and the pension funds do not receive substantial funding and are unable to fulfil social obligations. Thus, the tax reform is inevitable and is absolutely on time. Moreover, it is imperative during several years.

Today our critics who yesterday were the government, and failed in the allotted time, and 5 years is quite enough, to carry out tax reform. By the way, all these years they have failed to implement a single reform.

I will recall that the tax reform efforts in 2003-2004 have been broken by so-called "Orange Revolution". A prepared 2006 tax reform was not held due to the unconstitutional actions of the government in force, which led to that Verkhovna Rada of Ukraine did not work during 9 months and then was dissolved.

What did that led to - we are all witnesses.

But even a partial tax reform of 2003, when tax rate on personal income has been reduced from 36% to 13%, and the tax rate on profits was reduced by 5% has enabled the economy to unleash the potential and demonstrate a record growth rate: 12.6% a year. In the modern history of Ukraine that, unfortunately, is the only example of a successful development. It confirms the correctness of the chosen direction of reform.

Second. We need to realize that the tax legislation, like no other, affects the financial interests of the people. Even the 1996 Constitution and amendments thereto are adopted with much less resistance. About the scale of interest on the tax legislation of the society, business, parliamentarians is testified by that during the process of public discussion of the Tax Code more than 4.5 thousand amendments to the second reading and another 5 thousand amendments were made. In the history of the Parliament, none of instruments did attract such attention, did not cause such activity. Moreover, this is the fact.

Does it mean that a huge amount of amendments shows the insufficient preparation of this document? Yes, and no. On the one hand, the scale of the document generates the magnitude of problems, on the other side, that means that given a limited time it was impossible to take into account everything. Therefore, certain shortcomings in such large-scale document could find place. We are to fix the mistakes discovered.

Third. Does the tax code comply with the main tasks facing the economy: ensure the modernization and renovation of industry, create conditions for investment, provide high rates of economic and social development? The answer is unequivocal - yes.

This document, first, reduces the tax burden on the economy, rates of main taxes are consistently declining. This is a strong signal to business and investors. Secondly - tax administration becomes much easier and their number reduces.

I will cite one section of the Tax Code. The draft Tax Code changes the Administration rules in favour of taxpayers. For example, the procedure for filing tax statements, which lately has the most complaints. Three ways are introduced: apply directly or through a representative, send by mail, submit electronically through a system of "single window" of electronic reporting application.

Moreover, the draft Tax Code provides for the implementation of judicial authorization only for the actions of tax officers. I emphasize that - exclusively judicial. Only by the court decision the movement of funds in the accounts of taxpayers may be limiting, original source documents may be withdrawn.

These are lies about the search and seizure, which are constantly, unfortunately, used on television.

What is in reality? In the reality it is done exclusively by the court. Extending the term of administrative detention of property - only by a court decision. Recovery of property or funds in settlement of tax payers’ debt - only by court order. Forcing taxpayers to audit if the taxpayer waives its holding - only by court decision.

Code expressly prohibits without a court decision to make housing survey of citizens. Therefore, the lies are the author’s leaflets and other messages to report that after the enactment of the Tax Code the tax authorities have the right to intrude into citizens' apartments. What the lies are spread for around the country?

Second, tax administration is significantly simplified and their number is reduced. Thirdly, funds to modernize and upgrade the fixed assets are tax exempted. Fourth - the conditions for the withdrawal out of the deep crisis of such important areas as aviation, shipbuilding, light industry, which is practically in the country do not work, are created. Accelerated depreciation, that is accelerating the replacement of fixed assets and converging accounting and tax records is introduced.

At a time when Ukraine with tremendous stress is going out of the crisis, and when it uncertainty reigns on world markets, here and there, new grave crisis appear (it is enough to mention Greece, Ireland, Spain), in these circumstances, we should give the domestic economy a major boost to development.

Our country has no time for swaying, postponing reforms. The next year we must provide incentives for economic development.

Therefore, postponing tax reform - is postponing renewal and development. We all need to realize it.

Having that in mind, we are to make necessary changes to the tax code to make then in shortest time. These changes are to comprise maximum of observations of people working on a simplified taxation system.

Fifth. During the transition period, which would take about a year, we must abstain from fines, penalties and focus primarily on explanation. Government agencies and businesses should become partners, so that the economy growth gives every entrepreneur a chance to improve business and to improve lives – to each family. We have common goals: to bring the economy out of crisis and to ensure its development for human welfare.

Another lesson to be learned in that situation. This is extremely poor explanatory information work on tax reform. This is an example, when we could not answer the lies. Our opponents, focused on specific shortcomings of this paper, painted black all the positive of tax reform. But, our information services, responsible officials were unable to bring to every citizen an objective and honest opinion. If we will not learn this lesson, and will not provide information and explanation support for reforms, that will question the holding of any reforms. The Government will make the necessary conclusions from this and organizes qualitative informational and explanatory work.

Dear colleagues, last week an official visit of Prime Minister to Libya and Egypt had place. We have seen a dynamic development of these countries, which in 90-s were just on the way out of the "third world", and by the way were doing that with the help of our country. Today about 10% of Egypt's GDP is made on IT-technologies. In Ukraine, traditionally and till today the specialists for Middle East were prepared and trained, this index now is 0.4%.

We are to tell the truth to people, it's time to stop telling tales, I agree here with the President.

Another few years of reforms neglecting - and our economy will remain behind the civilized world. Our negotiations with the 2 states have shown how the populist, irresponsible policy of the previous five years is hanging over Ukraine by an oppressive burden. We had to bring the negotiations with the 2 states leaders to the level of the new page, as Ukraine, which had not met its commitments, has lost its face in the region. That is that, because our partners are not interested after all what kind of power we have. Commitments were done on behalf of Ukraine and the State must comply with them. It is easy to lose face, but it is hard to restore the reputation.

Therefore, for our government an absolute rule is: execute all commitments - international, to investors and to our own citizens. Only a promise implemented is a convincing fact and clears the way for cooperation development.

I would like to inform the Government that as the results of the Ukrainian-Egyptian negotiations Ukraine was granted the right to develop two oil fields in Western Sahara. We also agree with the Prime Minister of Egypt to establish operational working groups to develop sectoral cooperation projects.

Egypt is interested in intensifying cooperation in military-technical sphere, particularly in providing An aircraft. We gave the Egyptian side the An-74T-200, the last of contract series that allowed our party to discuss the possibility of creation till the end of 2011 of a service centre for An aircraft. I ask the Minister of Industrial Policy to take this into consideration and execution. This service centre will receive not only Egyptian aircraft of Ukrainian production but also of other countries of the African continent.

On the other hand, our contract to supply aircraft to Libya was derailed during 5 years. We managed to convince partners that till the end of next year, the contract would be executed. Through such arrangements we started negotiations in other directions. The programs of cooperation between Ukraine and Libya in agriculture are developed. The Libyan side is interested in continuing cooperation in the field of engineering, construction and electricity sectors, defence. They will consider our proposals for subway construction in Tripoli.

Therefore, I must reiterate my firm belief matured during foreign visits, during talks in Kiev. Foreign investors are waiting for our reforms, waiting for clear rules on the tax field, which, as we promised, are to become the most liberal in Europe.

Dear colleagues, the Government approved a very important, principle for the country development bill “on regulation of construction activities”. This bill is the product of collaboration of the Government and construction industry. This is a real example of how technology can create legislation in dialogue with the real sector, reputable specialists and experts.

At the first meeting on development of construction industry, we have identified problems that hamper recovery of the construction. Further, the work on drafting the law was done by the specialists of ministries and departments, experts, representatives of the builders. We have identified how to solve the problems that have accumulated, and how to create a catalyst to restore the building boom.

At the second meeting these developments were discussed, refined, approved by representatives of the construction industry. As the result we had, without exaggeration, a revolutionary law. So, we have set a deadline for construction permit issue: no more than 30 days – that is compared with that today permission obtaining may take up to 2 years. Indeed that is the revolution.

One-stop shops for building permit issue is introduced – to compare with today, one has to collect more than 100 approvals in various organizations.

So, in general 4-fold reduction in the number of licensing procedures and at least 7-fold - time to obtain permit. Implementation of the proposed rules will simplify licensing procedures for construction, optimizing the cost of installations, minimize corruption, as the licensing system in this area will be transparent and controlled. And also to plan and implement complex construction projects in the long run - it is a very important step, since at present the system of permits and approvals in city planning deters investors and delays construction projects. Almost in the next few days, the bill will be submitted to the Parliament.

Dear Colleagues,
Concerning the issues on the agenda.

Government will continue implementing risk-oriented system of state institutions supervisory functions. Today we will consider a draft resolution, which sets the frequency of inspections. As we have repeatedly informed the citizens of Ukraine on the initiative of the Government several documents have been adopted to simplify the procedure of permits obtaining to start and do business.

However, we are to minimize the possibility of abuse by officials, whom the state gave the right to perform these functions. So, at today's meeting we will consider the bill, which provides increased control over the licensing bodies, setting the frequency and reasons for inspection and sanctions for violation of the terms and issuance of permits.

Also among the agenda items we will address the problem of non-industrial injuries, which currently exceeds, unfortunately, the injuries at work. This problem has ceased to be local. Thus, according to our scientists, annual losses of economy of Ukraine due to only death and injury of citizens in households exceed 10 billion UAH.

At this session we will consider a bill which forms the basis for the priority of human security as prerequisites for sustainable development. However, here we cannot rely on control, education and information activities. In this context the priorities are much wider: increase traffic safety, enhance quality control of foodstuff and medicines, improve water supply, especially in rural areas.

Next question. There is no secret for anyone that recent years the recreational land was shortened in catastrophic pace, was divided on pieces, there were chaotic uncontrolled buildings. Government works on preservation and development of resort areas that are so rich in Ukraine. At this session we will consider a resolution "On approval of the regime for regions and areas of health resorts". This will ensure preservation of the unique natural medicinal resources.

The government will also initiate a ban on the alienation of the alcohol and alcoholic beverage industry. It is extremely important for preservation of property complexes, and in terms of state control over the circulation of these products, as statistics show that the number of poisoning due to consumption of alcoholic beverages from year to year is not reduced. Only last year more than 6 thousand people died for this reason.

We continue to bring national legislation with international and European standards, we are now considering amendments to the Law on Medicinal Products in the issue of domestic manufacturers of analogues of existing drugs. This will allow to fill the market the necessary medicines means of good quality and reasonable price, according to their needs.

We also consider an action plan to implement in 2011 a national program - the National Action Plan on Children's Rights.

Government is finalizing the adoption of regulations necessary for the effective implementation since January 1, 2011 of new Budget Code. At today's session in the frame of this work we will consider Pension Fund temporary cash shortages cover, as provided by Article 43 of the Code.

In international relations we have a number of agreements for consideration. In addition, there is a CBC programme for government consideration. In addition, we initiate the review of the provisions of the diplomatic mission of Ukraine. And a list of other issues.