Ukrainian oligarchy split over economic "reform," awaits arrival of Joe Biden

November 26, 2015 - 

yurasumy, PolitRussia - 

Translated for Fort Russ by J. Arnoldski

"Two paths of the economic future of Ukraine" 

In early November, 2015 an IMF mission was supposed to visit Ukraine. The mission had already planned its work. There were no signs of surprises. But, right up before that moment, a group of deputies from the pro-presidential block didn’t go forth with the initiative of taxation reform which would have left no stone unturned in the plan to slowly strangle the Ukrainian economy with Western credits.

And there is nothing surprising in the fact that the IMF immediately stood in fierce opposition to the initiative of the deputies. Moreover, the project was subjected to harsh criticism from the Cabinet of Ministers of Ukraine and became a cornerstone in relations between Kiev and international financial institutions. And here is why. If the bill of the head of the parliamentary committee on taxation and customs policies, Nina Yuzhanina, would have been adopted, then the result would be Ukraine traveling a very different path of economic development. Apparently, this was not included in the plans of the IMF. It’s time for us to see the difference between the two paths put before Ukraine and what exactly bothers our Western "friends.”

The "reform” of financial minister Natalya Yaresko

Everything here is simple and spelled out - the fulfillment of IMF requirements and the reduction of spending on the state apparatus and state expenditure. Greece already passed this path which led to a complete collapse of industry, poverty, and the loss of remnants of economic sovereignty to international financial institutions.

Greek prime minister Tsipras tried to play their game but, but after Russia and Europe reached an agreement, he departed into the shadows.

Year after year, savings will be all the more economical and necessary. Industry will wither and business will flee. After a few years, the Ukrainian economy will be decisively destroyed and this means that the objective of the IMF would be achieved. And thus starts the feast of the vultures.

And this is despite the fact that there are plans for next year to double defense spending  and simultaneously slash welfare by 60 billion UAH. And this is against the background of declarations of the unconditional fulfillment of the Minsk agreements and the end of the war.

The trump of Natalya Yaresko consists in that the IMF fully supports this program and on precisely these conditions the IMF has greed to continue refinancing Ukraine. The elites of Ukraine are terrified by the alternative: unmanaged default, chaos, and a complete loss of control over the country. In contemporary Ukraine, this is a very strong argument. 

The "reform” of the head of the parliamentary committee, Nina Yuzhanina

This parliamentary initiative arose in August, 2015 as an alternative to the proposals of the Ministry of Finance. If the "reform” of Yaresko were to be adopted, then the death of Ukrainian business would come. But among the ruling party there are many businessmen who don’t want to tolerate such a state of affairs. Therefore, an alternative was put forward. I would call it the "development project.” However, in many ways it will benefit oligarchic business and not small and medium business. But, first of all, in Ukraine this type of entrepreneurship has become the main one, and, secondly, small and medium business have no deputies to defend their interests in parliament. Yet they will be compelled to support Yuzhanina’s project in choosing the lesser evil.

What is the essence of this reform? Firstly, there would a total reorganization of the tax service. Many laws would be repealed. 

Even the tax police would disappear. 

The tax system would be simplified, automated, and there would be reduced tax rates. This would create a certain legal framework which would sharply reduce the government’s control of business and influence on its work. 

The main idea of this reform is to establish, all the way up to amendments to the Constitution, a total tax that the state cannot set higher than 35%. Currently, it’s more than 50%.

In the mind of the authors, the bill would allow for a cumulative effect of growth over time and allow business to spread its wings and lead the country out of financial abyss. To close the fiscal gap between revenues and expenditures, a group of deputies proposes to both slash budget revenue and drastically reduce costs. 

They aren’t speaking about this openly yet, but first and foremost this would concern the war. The 100 billion UAH pledged to the army for 2016 in the project from the finance ministry is a very tasty piece to be bitten by this project.

Staunch opponents of Yuzhanina’s project include Prime Minister Yatsenyuk and Finance Minister Yaresko. They talk of a cash gap of 207 billion UAH in the first year. This is their vision. The authors of this bill acknowledge that there will be a gap but not that it will be so large and, additionally, it could be significantly reduced if some of the priorities, as the one listed above, were sacrificed. 

At the stage of submission, this bill was supported by 130 deputies out of 421. It is obvious that during the crisis of government such a powerful opposition lobby on the part of the deputies of the corps can bury any law. The weak point of Yuzhanina’s law is its complete denial of the international "friends” of Ukraine. They’re not needed in this. And therefore they are afraid of it. They need a totally subordinated, poor country with an embittered population who will search their entire lives for someone to blame for their misfortunes, and they can find this in the person of their neighbor. 

A rich and prosperous Ukraine would poorly cope with this task. And therefore it is unacceptable in principle. 

Thus, there was a stalemate. The West is pushing its line. In Ukraine, there was quite strong opposition to this line. Nobody wants to lose. The year is coming to an end. All that remains is waiting for the master, who judges everything. Joe Biden arrives in Kiev on December 7.

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