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Opening speech by Prime Minister of Ukraine Arseniy Yatsenyuk at a meeting of the Cabinet of Ministers of Ukraine on December 22, 2014
23.12.2014 | 10:20
Information and Communication Department of the Secretariat of the CMU

Dear representatives of mass media!

The Government would like to present a reform package, which is submitted to the Verkhovna Rada of Ukraine, and which should be voted by the parliamentary coalition.

Over the past two weeks we have been working with all coalition members on developments of a number of tax and budget bills, social bills that should be adopted in the Parliament. Some suggestions have been included. Some proposals will be considered in the Parliament, during the consideration of these bills we will react adequately and accept or reject certain proposals. But now I would like to describe the main path, the path of those reforms, which everyone is talking about, which are needed, and which should be implemented in Ukraine.

First of all, let me start by dispelling some myths that for a quite long time are being discussed in Ukrainian society. They have been talking for two weeks and now let me say.

First, on a raise of the retirement age. At this stage, the Government does not propose an increase of the retirement age.

Second, on special categories of pensioners, at this stage the Government doesn’t offer changes to calculating pensions for special categories.

Third, on scholarships for Ukrainian students. Scholarships remain the same.

Fourth, on taxation or prohibition of receiving pensions for working pensioners. The current system for working pensioners also remains the same.

Why do I say "at this stage"? Because I hope that the reform package that will be adopted by the Parliament will enable Ukraine to receive additional income to the State budget and cover incredible social expenses of the current Ukrainian budget.

What are the goals we have set? The first goal is the tax equity. In terms of the tax equity we are implementing new approaches to tax big business or as so-called oligarchic business. Primarily, increasing a rental tax rate, namely for iron ore, oil, gas and condensate.

Second, the denunciation of the agreement between Ukraine and Cyprus, under which approximately UAH 6 billion was lost annually. Moreover, I want to emphasize that abolition of this agreement, unfortunately, does not envisage simultaneous termination of a special taxation regime, as Cyprus should also denounce it. Therefore, the Ministry of Foreign Affairs, following the voting in Parliament, will have a right to immediately start negotiations with Cyprus.

Third, the transfer pricing for large business. Namely, the inability to hide income in offshore zones and sell goods at a price that is below the market price, including introduced in the international stock exchange markets.

Fourth. The one who earns more should pay more. The one who earns less and needs certain social assistance should receive a targeted social aid.

As for the new rules in taxation in general, this is a reduction in taxes from 22 to 9. This is the first step to legalize salaries and reduce the tax burden on wage.

There are discussions with MPs over the terms of these steps. We offer to do it throughout three years. In 2015 the rate of a single social tax - 25%, in 2016 - 20%, in 2017 - 15%. We wanted to fix 15% at once, but there is a little problem – we won’t have the funds to pay the pensions. We believe the business is getting deshadowed, we reduce the tax rates. And we obtain, respectively, higher incomes as the salaries aren’t paid in envelopes. Therefore, the more wages are legalized, the less taxes the state will impose upon such wages.

As for deregulation. The Minister has introduced the first package of deregulation. At the first stage we have already halved the number of agencies that perform control functions and the number of functions, under which entrepreneurs are inspected. Now, at the second stage we additionally cancel 15 licenses, 3 permissions and 18 regulatory tools.

Further, on the social benefits that we are optimizing. A basic principle has been adopted: those who need help, who are poor, receive it. And the one who earns dozens thousands of hryvnyas and at this uses a discounted price for gas, electricity, housing and utilities, should not empty the pockets of the poor. Therefore, we have also proposed this package.

The Law of Ukraine "On State Budget" is objectively a very complicated budget. To make Ukrainian economy start growing in 2016, the year of 2015 should be the year of stabilization as well as clear and strict rules of working with public funds, taxes and social benefits.

I call on MPs to realize their responsibility to the Ukrainian people and the Ukrainian state. It is no secret that we are in the very difficult financial plight. The Government is doing what needs to be done. This package will give a possibility, I stress, a possibility, not a guarantee that our foreign partners will allocate additional funds for the financial stability of the country in 2015. I remind once again: this year we received USD9 billion, from which USD14 billion we spent on loans and debt of the previous government.

The great reformers who now stay in the minority, because they are now in opposition, they say interesting things about how we should act. I could tell how they were acting and how much we pay for this now.

During the Yanukovych regime, they took twice as many additional credits for three years than in the whole history of Ukrainian independence. In total, approximately USD40 billion of loans, for which we are now paying the interest, of which we should think how to repay them and on which we should receive financial assistance not for financing of a budget deficit, but the closure of the old billion-dollar debt.

So, that is a matter of each political party to make a political decision whether to support the country in this difficult period of time, or support those drastic measures which, in my opinion, are insufficient. But not everybody has enough political will to carry out such tough reform as in Poland, Latvia, Lithuania and other countries that later became member states of the European Union and today show growth.

Thus, I hope that in the process of working with MPs, we still get their understanding of the political responsibility for the future, not the present. Because now we are talking about the future of the country, which should become a member of the European Union, which must go through a difficult phase of development in order to make 2016 the year of growth and stability.

Tomorrow, the Finance Minister will present a draft budget. Also, the corresponding Ministers will present the related bills. The Government sends up to 40 bills to the Parliament for consideration and adoption. I am convinced that the country has no other path than the path of economic reform and political reform. We confess this way, we know what to do, and we will do so. This is the only true recipe for the country. And this is the reason why the new Parliament and the new coalition have been elected. This is the joint political responsibility of the Parliament, the coalition and the Government, which is formed on a coalition basis, each political party that is a member of the coalition has its representative in the Government.

So, dear friends, see you tomorrow, at the presentation of relevant reformist bills in the Verkhovna Rada of Ukraine.

Thanks to media for attention!


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