Law/12. Commercial law

Dolinin Vadym Volodymyrovich

Yaroslav the Wise national lawacademy of Ukraine

The problems of entrepreneurial activity in Ukraine

It is necessary to recognize, that one of the major freedom of a person is a freedom of enterpreneurial activity. It is a freedom which allows a person to make the choice: to work on the employer or to be engaged in enterprise activity independently. Each person should have the right to earn for his living by his own fair work, submitting only to fair laws of a society. However, having limited for population an opportunity to be engaged to an enterprise activity, the certain circles of people can receive economic levers for submission of a society. It is necessary to think, that a private businessman, who even receives rather smaller income than those workers, who are hired, is more preferable for a society. Because he is not submitted or exploited, so he is more proud and independent. Also he is an owner, so he has something to value. And that’s why such businessmen or undertaker is more patriotic, politically and socially active. It seems, that Ukrinian society should be formed mainly from businessmen, undertakers and entrepreneurs.

So has occured in Ukraine, that having grasped the government power and illegally having taken hold of the former state enterprises, small group of people, basically – from among criminals, have created system of counteraction of enterprise activity of citizens, compelling them to work only at the large enterprises.

A citizen of Ukraine who decides to be engaged in entrepreneurial activity will have to collide with huge number of sanctions, unreasonable normative requirements, and the extremely sluggish work of official bodies. The number of state supervising bodies is huge, continuous checks are proceeding, normative requirements to conducting all kinds of activity are extremely detailed and complex. There is unjustifiedly great the quantity of the reporting which a private businessman is compelled to provide constantly to supervising bodies, that forces for conducting even the least business without attraction of workers to employ administrative personnel. The extremely burdensome for businessmen in Ukraine are taxes, gathering and other kinds of obligatory payments. A catastrophic problem for business is extremely badly functioning legal system in Ukraine, unable to protect businessmen from illegal encroachments.

Not having an opportunity to be engaged in business, the majority of citizens work for masters or government, receiving the lowest payment for their work, a vast number of peole live in poverty. Thus, in the Ukrainian are incorporated legislation mechanisms of economic oppression of citizens. And every year the situation worsens. The reason for that is extreme lack of information for citizens comprehension in questions of economy and law, and also absence of democratic traditions and traditions of business which was forbidden in Soviet Union. The existing state of affairs is accepted as the normal phenomenon even by representatives of a science, professional economists and lawyers for the reason that they do not know how should be constructed normal tax and administrative systems in the state.

Thus, the basic problems of enterprise activity in Ukraine are:

1) complex allowing system;

2) unfairly big control by the state bodies;

3) irrational system of the taxation;

4) badly working institute of law in Ukraine.

The first and second problems concern mainly the government controlling and public administration. On the one hand, the absence of the state control over an activity of businessmen can bring the certain harm to a society. For example, consumers will be harmed if purchase poor-quality goods or services. On the other hand, excess of a necessary level of a state control is an enormous handicap of an activity of businessmen. Definitely, in Ukraine is observed the excess of necessary borders of control over enterprise activity, that inevitably conducts to corruption. The excessive state control over activity of private businessmen is shown by an establishment of very complex conditions for reception of a license, excessively detailed normative requirements to activity of businessmen, loading of businessmen by huge number of reports, the rigid control over the state bodies, which endltss supervising activity very often breaks usual process of manufacture. The situation worsens because of constant change of all these conditions and normative requirements, but rigid sanctions for their infringement always stay. For example, hardly can be considered as reasonable the requirement to security agency, compeling its chief to receive special formation on a speciality « Financial and economic safety», as it is stipulated in License conditions of conducting economic activities on granting the services connected with protection of state and other property, granting of services on protection of the citizens, approved by common order of State committee of entrepreneurial activity and the Ministry of Internal Affairs of Ukraine from 14.12.2004 N145/150. The foresaid speciality can be achieved only in one institute in Ukraine. Of course, one can say that this speciality is important to guaranty a high quality of service, but it can be opposed that it’s completely sufficient for a chief of a security agency to have juridical speciality or good experience in law machinery or military bodies.

For the decision of this problem it is expedient to define spheres of a social production which can cause the most serious harm for a life and to health of the population and to develop a sufficient level of the state control over these spheres.

Third of the above-stated problems is a problem primary of economy and distribution of welfare in society. The big barrier on a way of enterprise activity to Ukraine is such construction of tax system at which the main burden of the taxation lays down on small and average business. Thus though some payments formally are not concerned to be taxes, but they have all of tax attributes, so they should be included into definition of fiscal loading on business. One of vivid examples are the Law of Ukraine «About obligatory pension insurance» from 09.07.2003 №1058-IV and the Law of Ukraine «About gathering on obligatory state pension insurance» from 26.06.1997 №400/97-ВР which define the size of payments in solidary system of pension maintenance depending on the sizes of fund of a salary in an enterprise. It is easy to notice, that in capital-intensive manufacture, characteristic for the greatest enterprises, salaries and wages take a small part in the production cost price, and accordingly – a small part in proceeds. Whereas for private businessmen where manufacture is always labour-consuming, work – is a basic element of the goods and services cost price, and accordingly - the share of wages fund in proceeds is very great. That’s why, while a base of payment (taxation) is adhered to fund of wages, until large enterprises pay disproportionately smaller sum of a payment (taxation) proportionally to their income, and the income of small businessmen practically is completely absorbed by a payment (taxation). And absolutely unfair situation arises with the private businessman who works on itself and for which base of charge of the above-stated payment is whole his income!

Currently foundation of tax system in Ukraine proceeds, and the acceptance of the Tax Code becomes more and more actual. Considering the above-stated problems, it is necessary to reconsider the concept of Ukrainiat tax system construction, and a system of solidary pension maintenance which is necessary to financing from to the state budget. And the systems of taxation and collecting of other gathering and payments should be organized thus to remove burden from small and average business and to shift it on over greater incomes of proprietors of the big business. It’s needed to return progressive system of the taxation of physical persons, where tax level rises depending on a sum of person’s income as it had been before the Law of Ukraine «About the tax from incomes of physical persons» from 22.05.2003 №889-IV was accepted.

The fourth problem concerns basically a law, though has also serious economic roots. Any guarantees and freedom of citizens even fixed in the law, exist only when they are really provided by a state. It is complex to imagine normal conditions for enterprise activity in the state where without a bribe criminal cases are not started by a police, the courts are not capable to consider a claim of the businessman in normal terms, and execution service is not capable to execute the decision of court. And more such examples can be shown, but the fact remains constantly – the law in Ukraine does not work. If, for example, sociological interrogation is organized among Ukrainians, asking to them one question: whether the Constitution of Ukraine is executed, the majority, possibly, will answer that it’s not executed.

One of the major reasons of unsatisfactorily working institute of law in Ukraine is constant infringement of the law by the Ukrainian state. And it is not at only shown in acceptance of obviously illegal acts, like the Decision of National bank of Ukraine from 11.10.2008 №319 which directly contradicted the positions of the Civil code of Ukraine. Infringement by the Ukrainian state of the laws finds the expression first of all that the state does not provide execution of the laws and other regulations accepted by it. So, hardly it cam be said that in Ukraine exists sufficient legal proceedings if, for example, the appeal administrative court cannot accept the appeal complaint to consideration for more than a year. Also it is impossible to speak that the Ukrainian state provides execution of judgements if the state executor does not have even post stamps to send inquiry about presence of debtor’s property. The aforesaid concerns not only judicial or law enforcement bodies, but all systems of public services without exception. For example, in hospitals and polyclinics frequently for each procedure or the analysis from the patient is demanded a payment in the form of the donation. And in general, I think, that is inexpedient to speak that the state body normally functions if the person is compelled to stand in a queue more, than the half of work-day to get on reception to the official. Especially if the person under threat of the responsibility is obliged to get to that official and make certain actions, for example, when changing a place of registration and a military record. Who collided with work of any state body, possibly, would agree, that their work is extremely sluggish, poor and inefficientl. It is necessary to recognize, that any regulation of law, even norm of private law, demands the control over its performance from the state, that demands financial expenses.

Thus, any fair norm brings material advantage to a society, but before it demands monetary expenses for a work of state bodies. The richer is a society, the more extensive legal regulation it can afford. But every fair and appropriate regulation later contributes to a welfare to society. Important one condition – each norm of lawt should be strictly executed and provided with the state, differently the law will not work. For the rather poor states correct is to choice necessary spheres of regulation of public attitudes and a strict maintenance of the accepted regulations. In Ukraine the situation when the huge quantity of laws and regulations were implemented, but which performance the state cannot provide. The situation so-called «legal idealism» is observed. It leads to a catastrophic situation when the law actually ceases it’s existence, that becomes the reason of constantly growing number of offences, corruption, social pressure, disbelief in law and the human rights.

It is necessary to think, that a problem of the idle law – is the most important tragedy not only for businessmen, but also for all Ukrainian society. While the law doesn’t operate, all in what legislative and executive agencies are engaged – is absolute nonsense. Because owing the idle law the machinery of state loses real levers of influence on it’s own structural elements. What can be said then about the ability of Ukrainian state machinery to operate the entire society? Instead of seeking for ways to make the law been executed, the Ukrainian state invents informal mechanisms of management, as for example an establishment of plans for militia to haul for a criminal liability. But such mechanisms hardly can be considered to be useful for the Ukrainian society.

It’s necessary to develop criteria for the estimation the quality of the state maintenance of legal regulation in the basic public attitudes. Also it is expedient to develop the plan of sequence of introduction of legal regulation to those or other public attitudes. Certainly, such problem demands greater resources, but the importance of foresaid problem demands the priority decision. It will allow to create legal system not blindly, but according to scientifically proved programs. Besides results can prevent lobbyists, pursuing the mercenary purposes, to push legal regulation of less significant public attitudes.