Struggling entrepreneurs placed the blame for the continuing woes of Ukraine's fledgling small businesses suarely on the shoulders of the government at a Small- and Mid-Size Businesses Union press conference in Kyiv Thursday Oct. 9.
Union Executive Director Oleksandr Khriakov said state officials are making an enormous error by not only failing to nurture budding private enterprise, but by suffocating businesspeople with regulations and exorbitant taxes. 'They [state officials] do not understand that these people are the treasure of Ukraine, and that their experience of how to survive can help the whole economy to survive,' he said.
The union was established earlier this year to provide legal and social support to small-time free marketeers like 'shuttle traders,' who resell goods they buy abroad, and those selling goods from kiosks and rented retail space. Currently, the union is drafting pro-business legislation and appeals to state authorities on behalf of businesspeople who claim they have been treated unfairly. According to the union, just 1.7 million workers have got jobs with small- and medium-size businesses since 1991. Lawyers for the union said taxes remain a crippling force for independent entrepreneurs, with businesses officially paying 87 percent or more of their income to the state. Businesses dealing with import and export of products and services often may be required to pay up to 120 percent of their income to the state due to high customs duties. 'This type of tax policy is directed towards ruining small business,' said Valentyn Tkachenko, a union lawyer. Many of the businesspeople on hand told regulatory and legal horror stories.
Viktor Shabelnikov, a Donetsk entrepreneur who sells Western cosmetics from rented retail spaces, said local authorities had recently fined him violating payment mechanism regulations for renting publicly owned space. 'Besides, they sent the fine notice to my salespeople, who have absolutely nothing to do with the ownership,' said Shabelnikov.
The union is attempting to reverse a situation in which businesses have little legal recourse in appealing against government regulations and fines. To date, it has won 10 of the 12 cases it has brought against local administrations on behalf of small businesspeople.
The union is also working to reconcile the many contradictions and discrepancies between state and local laws that make businesspeople easy targets for legal or administrative ambush.
'If you quote a law [to state officials], they will show you an instruction from a ministry saying the opposite,' said Volodymyr Boiko, who heads a Kyiv-based show business company called East-West.
He said some of his biggest headaches come from obtaining licenses from the Culture Ministry.
'The ministry monopolizes all activities in the culture market, and to get a license you have to go from one official to another, from the Cabinet to the Culture Ministry, until you get back to the first guy and have to start all over again,' said Boiko. 'In the end, you get tired and give up any hope of breaking through this wall.' Businesspeople claim that some regulations are designed only for the purpose of collecting fines. Union member Hennady Kurkunov, who heads a company called Sokol, said the regulation requiring retailers to have cash registers is a case in point.
The regulation, which went into effect in July, led to a series of strikes in Kyiv and other cities. One point of contention was that regulation called for the cash registers to work on batteries so that vendors without access to electricity could keep an accurate record of sales. In practice, the batteries don't work on hot summer and cold winter days.
'It takes several days to fix the registers if something goes wrong,' said Kurkunov. 'So, businessmen will end up either working illegally or will loose business.' There are many other examples of impossible-to-follow regulations, he added.
'The situation is so difficult that the question is whether the middle class will be able to survive at all under these conditions,' said Kurkunov. 'All businessmen are ready to strike if that's what it takes to change the situation; but we don't want to strike, we want to work.'
