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Quarterly Report (Quarter III, 2015)

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Quarterly Report (Quarter III, 2015) Quarterly Report (Quarter III, 2015) 01 July 30 September Follow us: www.facebook.com/ BusinessOmbudsmanUkraine CONTENT Content Foreword of the Business Ombudsman 4 1 Complaint trends in figures 6 1.1. Number of complaints received 7 1.2. The term of the preliminary review of complaints 7 1.3. Grounds for declining complaints 7 1.4. Government agencies subject to the most complaints 8 1.5. The term for complaint reviews 9 1.6. Geographical distribution of complaints received 9 2 Complaint trends and notable cases 10 2.1. Subject of complaints received 10 2.2. Information on closed cases 11 2.3. Notable cases 13 2.4. Complainants’ feedback 20 3 Recommendations to the Government of Ukraine 22 3.1. Systemic report “Problems with administering business taxes in Ukraine” 22 3.2. Systemic report “Problematic Issues in the Area of Cross-border Trading in Ukraine” 25 3.3. Follow-up of systemic reports of the previous quarter 27 3.3.1 Report on Systemic Problem “Problems for businesses as a result of the military situation in the East of Ukraine and the annexation of Crimea” 27 3.3.2 Report on Systemic Problem “Getting access to electricity” 4 Cooperation with stakeholders 30 4.1. Working visits 30 4.2. Cooperation with government agencies 32 4.3. Public outreach and stakeholder communication 33 5 Events right after the end of the reporting period 35 Advocating for business with the government 3 INTRODUCTION Dear Friends, Colleagues and Partners, It is my pleasure to present the second quarterly process and after closing each case. Our report of the BOC* of Ukraine. In the nearly five analysis of the feedback received by the end of months since we started working on May 20, this quarter showed that 76% of complainants 2015, we have put every effort into our mission were “very much satisfied” with our work and the to improve the business climate in Ukraine by other 24% said they were “satisfied.” easing the regulatory burden on business and maintaining a dialog with entrepreneurs and Among the obstacles Ukrainian businesses government institutions. face, problems with administering business taxes were among the most acute. Dilatory In the third quarter of 2015, 197 complaints VAT reimbursements, manual intervention were lodged: a 14% increase from the in electronic VAT declarations, the absence 172 complaints submitted in the first reporting of a centralized system of tax avoidance risk quarter. In the current quarter, we also assessment, refusal to register VAT taxpayers, successfully closed 40 cases, with a direct state tax and fiscal agencies exceeding their financial impact of more than UAH 115 million. authority during inspections, unfounded criminal proceedings against business, and With transparency pivotal for us as an repeated failure on the part of central and local organization, the Council actively seeks feedback government officials to enforce court rulings from complainants throughout the investigation in favor of a business remained among the * BOC and the Council are used interchangeably throughout the text to refer to the Business Ombudsman Council 4 www.boi.org.ua INTRODUCTION most critical issues in the reporting period. complaints during our first two quarters. The Council prepared comprehensive systemic report “Problems with administering business I also continued my working visit schedule, taxes in Ukraine” to help resolve the problems traveling to Donetsk, Dnipropetrovsk, and Odesa we identified. Oblasts, where I met with both business and government representatives. We discussed the We also prepared practical recommendations most urgent issues and opportunities to expand in our systemic report “Problematic issues in the investment potential of these regions. the area of cross-border trading in Ukraine” for Following my working visit to Dnipropetrovsk improving the current practice of foreign trade Oblast, the Governor’s Office offered public regulation, looking at licensing, quota allocation, assurance that it would cooperate and its dual-use goods determinations, enforcement, readiness to tackle the problems local SMEs and so on. We hope that recommendations encounter. provided in this report will help Ukraine improve its position in the World Bank Doing Business During this reporting quarter, I had the ranking where currently Ukraine is at 154th** privilege of sharing the Council’s experience place. in launching activities in Ukraine at two distinguished international events: the “Anti- As we have stated publicly before, we uphold Corruption Reform and Business Security in our commitment to signing Memoranda of Ukraine” roundtable in London and the 16th Partnership and Cooperation with the key International Anti-Corruption Conference government agencies that have the strongest in Malaysia. The audience at the two events impact on Ukraine’s business climate—and the combined included more than 800 participants ones against whom the most complaints have from over 100 countries. From the transparency been lodged. standpoint, I believe this opportunity to share our work and achievements with international In this reporting quarter, the Council signed a organizations, entrepreneurs, civil servants and Memorandum of Partnership and Cooperation the media was very timely and useful. with the Ministry of Justice, providing for two specialized expert groups to be co-chaired by I realize that we are at the very beginning of a the respective Deputy Minister of Justice and long journey to make Ukraine an attractive place the designated Deputy Business Ombudsman, to invest and do business in. Thus, it’s been very to analyze selected complaints submitted to encouraging to see mostly positive reactions the Council in the spheres of state registrations among state authorities to our requests and and mandatory enforcement of court decisions. recommendations. Should this independent panel discover evidence of illegal actions on the part of a I look forward to more opportunities to Ministry official, that official will be held liable. share feedback, ideas, complaints and recommendations as to how we might help Right after the end of this reporting period, the Ukrainian business develop and conquer new Council committed itself to signing a similar markets, and restore public trust in constructive memorandum with the State Fiscal Service, dialog with the government. the government agency subject to the most Algirdas Šemeta Business Ombudsman ** On October 27, 2015, the new Doing Business 2016 ranking was published where Ukraine ranked 109th. Advocating for business with the government 5 COMPLAINT TRENDS IN FIGURES 1 Complaint trends in figures 1.1. Number of complaints received (Clause 5.3.1 (а) of Rules of Procedure) In the second quarter 67 of its operations, the Business Ombudsman’s 64 passed the preliminary complaints were declined office received review procedure and are as not fitting the eligibility currently being considered criteria set by the Rules of Procedure Сomplaints are undergoing cases were closed after the preliminary review completion of investigation. procedure 197complaints 26 40 The number of complaints grew at an exponential rate since the Council launched its operations on May 20, 2015. By the end of the reporting period (4.5 months since launch) the overall number of complaints totaled 369. 6 www.boi.org.ua COMPLAINT TRENDS IN FIGURES 16% 84% of complaints of complaints were lodged by small were lodged by large and medium enterprises companies. (SMEs) 1.2. The term of the preliminary review of complaints (Clause 5.3.1 (b) of Rules of Procedure) During the reporting quarter, the Council’s decisions to consider or dismiss a complaint were made, on average, in eight working days, two days less than the 10-day period provided in current regulations days for the preliminary assessment of complaints. 2 less 1.3. Grounds for declining complaints (Clause 5.3.1 (с) of Rules of Procedure) complaints During the reporting period were dismissed 64 for the following reasons: The party affected by the alleged business malpractice has not 24% exhausted at least one instance of an administrative appeal process 18% The complaint submitted was subject to court or arbitral proceedings, or in 23% respect of which a court, arbitral or 29% similar type of decision was made The complaint failed to comply 12% with the requirements to the form 9% The complaint did not comply with the other eligibility criteria 11% 2% In the opinion of the Business In the previous Ombudsman, the complainant did not 9% quarter were provide sufficient cooperation 7% dismissed Complaints arising in the context of private-to-private business relations 7% 11% Complaints in connection with the complaints legality and/or validity of any court 4% 54 decisions, judgments and rulings 2% In the opinion of the Business 4% Ombudsman, the complaint had no Second reporting quarter substance 15% Complaints filed after the expiry of the limitation period 3% 5% First reporting quarter Anonymous complaints 3% 2% Advocating for business with the government 7 COMPLAINT TRENDS IN FIGURES 1 Do you file a complaint against private business? Check if your NO YES complaint meets the Has court, arbitral or similar type of decision already Council’s criteria 2 been made regarding your complaint? NO YES Has one year passed since the last occurrence 3 of business malpractice? NO YES Have you exhausted at least one instance 4 of an administrative appeal process? YES NO Your complaint is eligible for consideration by Business Ombudsman 1.4. Government agencies subject to the most complaints Overall, based on statistics of two consecutive reporting quarters, the “anti-ranking” of complainees has basically remained unchanged, with State Fiscal Service of Ukraine being the leader of the chart. 42% 12% 9% 8% 5% the State Fiscal the Prosecutor’s Municipal Ministry each of: the Parliament, Service of Ukraine, Office. administrations of Internal the Cabinet of Ministers, including the State Tax (councils). Affairs. the President, State Inspection, and Enforcement Service, the Customs Service. the Ministry of Justice.
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