Here is the October 8, 2024 edition our weekly Ukraine Business Roundup newsletter. Subscribe here to receive the latest news on business and technology from Ukraine in your inbox.
As the bill moves through the Verkhovna Rada (Ukraine’s parliament), the public reaction to the tax increases continues to grow, especially from the business community.
Where the law is: Ukraine’s parliamentary Tax Committee has approved a draft of a law on tax increases after it passed first reading last Thursday.
Yaroslav Zelezniak, a member of the committee and a lawmaker, said that the key provisions of the draft law have not changed.
These provisions include an increase in the added military tax, from 1.5% to 5.0%, higher taxes for those who are self-employed, a 50% tax rate on bank profits and a 25 percent tax on financial institutions.
The second reading of the draft law is scheduled to take place in the parliament this week. Zhelezniak said that over 1,388 amendments had been submitted.
Remember: Russia faces a budget deficit of $35 billion next year. And as the war in Russia continues into its third year without an end in sight, it needs to find funding in order to keep its economy afloat, and to finance its war effort.
What they are saying: Ajax Systems’ founder Aleksandr Konotopskyi, a well-known Ukrainian businessman, has taken to the social media to call on the government do more to pursue corrupt businesses who evade taxes.
“It’s better to leave the economy alone.” Konotopskyi wrote in a post on Facebook that “there is still something to leave alone.”
Tomas Fiala, the head of Dragon Capital, commented to Forbes that he agreed with Konotopskyi and said that the government had done too little, too late, to raise the funds necessary to finance the country‘s defense.
Forbes reported that he said, “The government must do its part to show zero tolerance for corrupt practices, close down the shadow economy and ensure everyone pays their fair share in taxes.”
Fiala believes that the best way to raise taxes is by increasing the value added tax. This idea was supported by the Finance Ministry, the International Monetary Fund, but rejected by the office of President Volodymyr Zelensky and the Cabinet of Ministers.
Forbes interviewed other businesspeople who echoed the sentiments of Forbes and urged the government to focus its attention on reforms in customs.
A reforming law for the sector has been passed by parliament and is awaiting the president’s signature. The government may have tried to placate some business concerns by pushing through customs reform, but it was not very successful.
“It’s not necessary to increase taxes for white businesses, but to combat the more than 40 percent of those who are in the shadows.” They have a competitive edge due to tax evasion,” OleksandrSokolovsky, CEO Textile-Contact.
Here’s more information about the proposed tax increase — the first since the full-scale invasion began.
Ukraine wants foreign observers to be near nuclear plants
As the cold weather approaches and fears grow that Russia will attack Ukraine’s nuclear power stations — the country’s primary energy source — Kyiv has proposed a plan to place international observers close to its three operating nuclear plants.
At an event in Kyiv, last week, an official from the Energy Ministry said that observers could help ensure the safety of the plants as Russia prepares to attack infrastructure, such as the substations connecting them to the country’s grid.
The idea is a bit far-fetched, and the agency has not made any public announcements about sending anyone.
Ukraine’s request is not without reason. Russia attacked substations near Ukraine’s western Rivne Nuclear Power Plant at the end August, causing blackouts. And recently, on October 1, substations connected with the Russian-occupied Zaporizhzhia Nuclear Power Plant, cutting off an electrical line to the facility.
Click here to read more.
AeroVironment will produce kamikaze drones at its Ukrainian facility
AeroVironment, a U.S. company, signed an agreement with a Ukrainian firm to localize the production of Switchblade600 loitering munitions. This is the latest in a series of recent agreements between Ukrainian companies and foreign companies for the production of weaponry in Ukraine.
Security reasons prevented the company from being named.
The agreement was signed in Kyiv on October 1 at the DFNC2 International Defence Industries Forum, which brought together nearly 300 companies from more than 30 countries.
Switchblade 600 is an loitering munition that is used to crash into targets. They can fly up to 40 kilometers and stay in the air over 40 minutes.
Brett Hush, senior vice president of AeroVironment, who signed the agreement in Kyiv praised the Switchblade’s performance and added that “with the support from Ukraine and feedback, it will be even better.”
Click here to read more.
Demand for rural homes is growing in Ukraine
Liga.net reported that Ukrainians are increasingly moving to rural areas in search of more space and safety.
The demand for rural housing began to increase during the Covid-19 epidemic and has continued to grow since the full-scale invasion. Individual homes are more resistant to blackouts than high-rise apartment blocks.
Liga.net reports that demand in the central regions of the country, including the Kyiv region, has risen sharply, returning to pre-war levels by 2021. Liga.net reported that housing prices in the Kyiv area have increased by 50%.
Ukrainians prefer to renovate their older homes because it is more affordable. In line with this trend, several bloggers in the country have appeared on social media offering tips on rural home remodeling.
What I’m watching
The Ukrainian government plans to introduce a system of “economic reservation” in order to protect certain employees against mobilization. The move would allow more people to be eligible for reservation, even though some are already protected (such as energy sector workers). The issue is divisive and extremely sensitive. Questions remain about how society will react, especially those who serve.
What else is happening?
Shmyhal: Ukraine and Slovakia to create joint hub for energy, Shmyhal says
At a press conference on October 7, Prime Minister Denys Smyhal and his Slovakian counterpart Robert Fico said that the new energy hub will make use of existing gas storage infrastructures and cooperate in the nuclear energy field.
Bloomberg reports that the EU is considering a way to overcome Hungary’s objection to Ukraine receiving $6.6 billion.
Bloomberg reported that the EU is considering allowing its member states to make voluntary donations to the European Peace Facility. This would bypass the need for unanimous approval to disburse funds to Ukraine. Unnamed officials familiar in the matter were cited as the source.
Russia strikes civilian vessel carrying corn from Ukraine
The Infrastructure Ministry reported that the bulker attacked on October 6 was loaded with approximately 6,000 tons Ukrainian corn intended for export. The owner of the ship, Greece-based AK Shipping, confirmed that Russia had attacked it.
Naftogaz CEO: Ukraine’s gas storage systems still fully operational in spite of Russian attacks
In an interview published in the Wall Street Journal on October 4, CEO of Naftogaz Oleksiy Cernyshov said that foreign traders had injected only 0.5 bcm of gas into Ukraine’s gas storage facilities. This is down from 2.5 bcm in 2023.
Digital Transformation Ministry: More than 200 foreigners applied for eResidency.
Last week, the country launched an eResidency program, which allows citizens from India, Pakistan and Thailand to access services in the country remotely. This includes the ability to open bank accounts and business accounts, as well as pay taxes at a reduced rate. Last week’s roundup has more information.
Liliane is a business editor for the Kyiv Independent. She worked previously at the Kyiv Post, first as a business reporter and then as a business editor. Liliane has a master’s in Russian, Eastern European and Eurasian Affairs with a focus in Ukrainian studies from Columbia University. She served as a Peace Corps volunteer in Ukraine from 2017-2020, and then interned at the Atlantic Council‘s Eurasia Center.
Read More @ kyivindependent.com