Business and government representatives have recently discussed a new domestic trade pattern at an open session of the Coordination Council for Small- and Medium-Scale Entrepreneurship. They met for a second time to come to a common denominator. Each side has its own arguments. The government is convinced that its draft law “On Domestic Trade” will help streamline markets and online commerce. Conversely, business insists that the approaches the document offers will not set things right and will inevitably monopolize the market and freeze out small-scale entrepreneurs.
Entrepreneurs have several remarks about the draft law.
Firstly, as Serhii Dorotych, chairman of the Entrepreneurs Protection League, told The Day, the proposed document puzzles business with hard-to-grasp notions and imperfect provisions that run counter to the Tax Code of Ukraine. Hence, this “set” allows supervisory bodies to interpret the law at their own discretion and, as a result, to impose fines on businesses.
Secondly, the draft law clearly shows preference for large trade networks to the detriment of smaller players. For example, Dorotych says, Article 11 of the draft law obliges marketplaces to make use of model contracts. Besides, there should be not only workplace rental contract, but also concomitant services contracts.
“The entrepreneur now pays a market fee which includes all expenses for heating, electricity, cleaning, and garbage removal,” says Eduard Kurhansky, activist of the Assembly of Small and Medium Business Nonprofit Organizations of Ukraine, explaining to The Day the details of the current state of affairs on the market. He says that, under the new law, every trader must also sign a contract with each of the organizations that provide these services on markets. “The entrepreneur will be in fact concluding contracts instead of carrying on trade,” Kurhansky adds. At the same time, this provision is not applicable to the commercial networks that rent out market worksites.
Also in the pipeline are new restrictions and obstacles for rank-and-file farming producers at ordinary marketplaces: they will no longer be able to sell their produce freely. Dorotych says that, under the new law, the worksite rental contract must be coordinated with local government bodies. “Why should the private entrepreneur coordinate their own contracts with a local government body? I don’t see the point. Nor do I understand why a ‘third side’ is needed for private business in the conditions of a market,” the entrepreneur sums up.
Thirdly, the question of landscape design elements (LDE) still remains unsolved. Item 3 of Article 13 sets out that sale sites must be established on the basis of a rental contract only. “In Kyiv, only about 10 percent of LDEs are located in the area stipulated by the rental contract. And the blame for this does not lie with private business – it lies with the government which first devised a shady scheme of permits [for LDE installation] and has now come up with such thing as share,” Dorotych says. He claims that the government itself does not want to lease out land because one can appeal to a law court with this document in hand and, hence, it will be impossible to “milk” the entrepreneur. He estimates that if the current version of the draft law “On Domestic Trade” is adopted, this will provide grounds for destroying 90 percent (12,000-15,000) LDEs in Kyiv, which will leave 50,000 employees jobless. A similar situation will also arise in many other regions because the procedure of leasing out land for small stores is very intricate and shady. So, in the view of the Entrepreneur Protection League chairman, it is first necessary to simplify the system of renting land for LDEs.
Dorotych also thinks that a compromise is needed about the provision that every retail outlet should sell goods both in cash and in a cashless form. For it is difficult to do so in a village, where there is often no access to the Internet, or at a marketplace, where one old woman sells goods today and a different one tomorrow. “Yet we should strive for this to be done in the future,” he says. But, so far, there should be a transitional period before all these innovations have been put into practice.
Entrepreneur Kurhansky adds: the government’s initiative, in its present shape, will also destroy the groundwork for the development of online commerce. “The current low prices for goods in the Internet exist, to a large extent, because there are no stationary premises and a large staff. But the governmental document in question demands that online shops should have their own or rented premises,” he says. Meanwhile, the current law allows this kind of entities to work at the place of their registration.
In addition, this law will deal a staggering blow not only to small-scale business, but also to food producers. As Dorotych explained, the draft law has a clause that allows trade networks not to pay to the producer in case of minor infractions during the delivery of produce. “For example, if a batch of milk being supplied to outlets lacks one bottle, it is grounds not to pay money to the producer and an opportunity to dodge penalties. Can you imagine what a powerful blow will be struck on commodity producers? But they call this supporting the national commodity producer,” he concludes.
For this reason, entrepreneurs say the law is imperfect and should not be adopted in its present shape. Besides, trade issues are regulated by the Economic Code. So if some changes in the work of marketplaces are inevitable, they must be made to the code itself. Businesspeople have their explanation of why it is attempted to lay down the procedure of “new-style trade” in a separate law. According to Dorotych, the law’s text clearly shows a tendency to flout the rights of small-scale business and give considerable preferences to large trade networks. It looks like a redistribution of the market is underway. “This law lays the groundwork for the monopolization of the trade market,” Dorotych says.
What is this going to lead to?
Kurhansky explains that we should expect “kickbacks” and retail prices to rise in order to make up for businessmen’s additional expenses. “And the main organization that will be collecting them is not the Tax Inspection but the Consumer Rights Directorate. This draft law vests them with extensive powers. They will be authorized to examine not only a warehouse or a retail outlet, but also the apartment where a business is registered,” he adds.
“If businesspeople are not heeded, they will be ready to come out onto a new ‘tax Maidan,’” Dorotych summed it up.
