The President has submitted two bills to the Parliament:
- the amendments to the Law on corruption prevention (reg.No 6674) aimed at abolishing e-declarations for anticorruption activists;
- the amendments to the tax code (reg.No 6675) that introduces new form of tax reporting for the NGOs and individual entrepreneurs that get money from international technical assistance (ITA).
On July 11 MPs failed to include both bills in the agenda for July 11-14 plenary week: out of the necessary 226 votes the amendments to the Law on corruption prevention were supported by 209 (21 members of the BBP faction were present in the plenary hall but neglected voting), and the amendments to the tax code got even less – only 183 votes.
The President was ready to sign the bills and submit them to the Parliament last Friday, July 7, during an ad hoc meeting with the civil society representatives, organized by his Administration. Activists’ requests to get the text in advance were ignored, but even a shallow analysis at the very meeting showed a number of problematic provisions. Therefore Presidential Administration agreed to give activists a night to prepare and submit their proposals.
The first bill (No 6674) abolishes all regulations regarding e-declarations for anticorruption activists and their (sub)contractors; while the second (No 6675) introduces new form of reporting for all non-governmental organizations and certain categories of individual entrepreneurs. ANTAC prepared proposals to the second bill No 6675 and most of them were taken into account.
However, there is still a number of issues we would like to draw your attention to.
Although NGOs already submit 5 different types of reports to various state institutions, the bill obliges all NGOs that receive income which exceeds 480,000 UAH (appr. 18,500 USD) to file additional public report. The form should be approved separately by the Government, but the bill demands that it includes:
- composition of governing bodies of the NGO;
- number of members of the NGO, amounts of fee in the tax year, and their actual collection;
- list of donors and amounts of money received from them per each project if exceeds appr. 80,000 UAH (3,100 USD);
- number of full- and part-time employees, total salaries expense, list of 10 employees with the highest salaries;
- total spendings of the NGO made to physical persons (including individual entrepreneurs) and legal entities, the list of these persons and entities and amount of spendings made to each if exceeds 80,000 UAH (3,100 USD) per year;
- participation of NGO leaders in the governing bodies of other NGOs and private legal entities.
Such a report should be published by the NGO and the fiscal service after they receive it.
In case the NGO doesn’t publish the report or fails to submit it on time to the fiscal service sanctions in the form of withdrawal from the Register of nonprofit organizations may be imposed, which would lead to obligation to pay profit tax for the whole tax year. This creates a space for manipulations: the facts when the website doesn’t belong to the organization or some technical problems cause delay in report publication may be used as pretexts to abolish nonprofit status, that can be renewed only by the court decision.
Another innovation is an obligation of a certain category of individual entrepreneurs who receive money directly from the donors (ITA) to submit specific reports. They would need to fill in an annex to the tax declaration on a quarterly basis (which would also be published by the fiscal service) mentioning:
- level of revenue and donor from whom it was received;
- amount of payments made to third parties at the expense of this revenue, indicating the list of third parties one-time payment to whom exceeds 4,800 UAH (appr. 180 USD).
This may also cause speculations as in practice it would be impossible to distinguish which specific costs were covered by which revenue, and therefore individual entrepreneurs would be forced to declare personal expenditures too. Given that even top officials declare much higher expenditures (that exceed appr. 3,100 USD) 180 USD for individual entrepreneurs look ridiculous and senseless.
This regulation would apply to all individual entrepreneurs who receive funds directly from the donor, ie foreign states, governments and authorized foreign agencies, foreign municipalities or international organizations which provide ITA to Ukraine in accordance with international treaties. Individual entrepreneurs working with the reforms offices under governmental institutions would also be subjects to this type of reporting.
The bill also introduces sanctions for individual entrepreneurs-single tax payers for non-submission of this report or false statements in it by transferring such an entrepreneur to the general tax system (which would cause significant increase of taxes). Moreover, such an entrepreneur would be banned for a year from switching back to the single tax system.
By these measures certain categories of entrepreneurs that receive money from ITA would be discriminated.
The authors of the bill might believe that the use of ITA funds require additional transparency because of the risks of being misused, but in that case it is not clear why the same level of transparency is not introduced for the entrepreneurs who received funds in public procurement or from political parties.
Also, the legislator actually forgot that ITA funds in fact are foreign taxpayers’ money, which are provided to our state for reforms implementation. And while international partners themselves control the spending of their own funds, Ukraine, instead of properly overseeing its finances, creates artificial mechanisms of control over the money of the countries that help us.
Abovementioned issues can be corrected before the second reading, however, in order not to allow the bills to be worsened and new “Chornovol’s amendments” to appear a close monitoring over the process is crucially needed.