May 17, 2016

Maryan Zablotskyy, head and co-founder of Ukrainian Economic Freedoms Foundation speaks in Kyiv to a group of taxpayer advocacy groups from the United States, Italy, and Lithuania on Dec. 10, 2015.

Ukraine’s people have been crushed for years under the weight of an authoritarian regime and a stagnant economy, but new Atlas Network partners are working to change the country’s direction. Ukrainian Economic Freedoms Foundation (UEFF), founded in 2015, is working on several projects to help reform the judicial system, streamline bureaucratic obstacles to business activity, provide taxpayers with useful information about deductions and protect them from arbitrary tax hikes, promote transparency for government expenditures, and much more.

“Ukraine ranks traditionally poor in most freedom rankings, except for those related to free speech and elections,” said UEFF co-founder Maryan Zablotskyy. “The economy is heavily regulated and the tax burden on the economy is high. Ukraine ranks a disgraceful 162nd place in the Heritage Foundation’s Index of Economic Freedom and 122nd in the Fraser Institute’s Economic Freedom of the World report. Ukraine also ranks 109th place out of the 129 ranked countries in the International Property Rights Index. The government remains largely focused on the World Bank’s Ease of Doing Business ratings, where Ukraine is ranked 83rd. Currently there is a big wish from the society to gain greater economic freedom. Yet there is relatively little volume of good legislative proposals in this respect.”

The judicial system in Ukraine is also a special focus for UEFF’s long-term reform efforts, although Zablotskyy acknowledges that reforming it will be a mammoth task.

“The biggest trouble for everyday citizen is the fairness of the court system,” Zablotskyy said. “It is heavily corrupt and lacks professional judges. One can have even the best laws in the world. Yet the corrupt can freeze assets and violate private property rights anyway.”

To that end, UEFF is taking many practical steps through projects that provide tangible benefits to Ukrainians currently suffering from burdensome government interference. UEFF’s Wikipermit website project will contain every government permission document, including licenses, registrations, and certificates, that businesses and citizens are required to obtain and file in order to engage in economic activity.

“We want to put statistics on how often each permission document is issued, what is it's cost, refusal rate, procedure, duration of issuance etc.,” Zablotskyy said. “We want to offer people and businesses the chance to rate each permit in terms of corruption levels associated with it, its usefulness, and the ease of each procedure. I expect the first website draft to be ready within 4–5 months. Next, based on the data collected, we will propose a draft law that will abolish some of the permission procedures.”

In order to protect taxpayers, UEFF is working to draft a law requiring mandatory provision of information about tax deductions available for Ukrainians as they receive their salaries and purchase products. The organization is also planning to launch a pledge among members of Parliament by which representatives would promise not to raise tax revenues in relation to GDP. A UEFF database on government expenses would also compile information that can be used to report on the use and misuse of taxpayer funds.

UEFF also worked toward adoption of a law that led to abolishment of 22 permission procedures for businesses in the Ukrainian agricultural sector, and helped set case for greater efficiency in taxpayer spending on technical assistance programs.

“Among them, the quarantine certificate for food imports was abolished, the license for catching fish in internal waters, the quality certificate for fishing ships, obligatory registration for certain types of fertilizers, etc.,” Zablotskyy said. “The latter has led to elimination of de-facto Russian monopoly on local fertilizer market. As a result, businesses will be able to save up to $300 million per year in direct costs. For the first time fertilizers from EU are being imported into Ukraine without their prior registration in Ukraine, which took on average 500 days. This resulted in a significant drop of domestic fertilizer prices and greater foreign trade volumes.”

Zablotskyy said that other highlights of the procedure reform law include:

  • In 2014, a total of 9,785 quarantine permissions for imports of food products were issued in Ukraine. The average reported bribe was $15–35 per ton of products. The certificate was completely eliminated in 2016 thanks to the law.
  • In 2014, 124 companies received license for fishing in internal seas of Ukraine. This was abolished for internal seas in 2016 thanks to the law.
  • In 2014, a total of 3,448,616 veterinary documents for animal and feed products were issued. Since 2016 they became voluntary for the food grain. This lead to lower corruption and lower transport fees.
  • With the law, businesses were allowed to extract up to 300 cubic meters of water per day without any permits or licenses.

“The project was aimed at two things,” Zablotskyy said. “First, to achieve greater economic freedom through deregulation as described above. Second, to show the wastefulness of vast majority of taxpayer-funded technical assistance programs. Both goals were achieved.”