Borys ZAHREVA: "For the first time throughout Ukraine's independence, the budget is truly socially oriented"

Borys Yukhymovych, how do you assess the already updated Budget for 2005?

The 2005 budget is indeed socially oriented for the first time over the entire period of Ukraine's independence. The expenditures this time are distributed in such a way that this will provide an opportunity to resolve most of the country's social problems. This includes raising the minimum wage, resolving the issue of raising pension provision, resolving such social problems as increasing payments upon the birth of a child, providing assistance to single mothers, orphan children and disabled children. From this point of view, the state has taken a great step toward approaching European standards in social indicators.

It is known that the work specifically in the Budget Committee was quite intense, and for several days it practically continued around the clock. What results were achieved during the refinement of the budget, and with which proposals of the members of the relevant committee did the government agree?

After consideration of the budget in the Committee, it was adopted taking into account serious remarks. If the Cabinet of Ministers in its draft proposed to cancel the privileges for agricultural producers, we were able to defend these privileges. This could have led to serious problems in agriculture, even to the liquidation of farming enterprises, as well as to the bankruptcy of agricultural enterprises that are operating today. We were able to defend before the government those provisions that provide an opportunity to resolve the problem concerning enterprises registered under the single (fixed) tax, which were under threat of liquidation. After all, the amendments to the Law of Ukraine "On Value Added Tax" envisaged a norm that would have placed them in a difficult situation. This norm would have forced such enterprises to re-register as taxpayers on a general basis within 30 days. It is also positive that specifically in the Budget Committee we were able to defend, and the government treated this with understanding, and the session hall supported – the resolution of problems of the automobile manufacturing sector, which has begun to develop in Ukraine. The budget is filled when there is an economic component of its filling, in particular – the operation of enterprises, expansion of their production, increase in jobs. Accordingly, an increase in jobs automatically leads to wage payments and filling of the Pension Fund. Therefore, in that part, the government, following the proposals we introduced, approached it in a balanced manner and agreed to leave opportunities for the development of automobile manufacturing. Specifically, the introduction of a 5% duty on the import of automobile kits and a 20% duty on assembled automobiles imported from other countries provides opportunities for the further development of this sector and the creation of new jobs. We also resolved the issue of gasification of populated areas, and the government agreed with our proposal regarding the allocation of 2% from gas sales for the formation of revenues that will be directed to the gasification of rural populated areas. According to preliminary calculations, the volume of funds to be directed to gasification was envisaged to amount to 360 million hryvnias. Problems remain regarding shipbuilding and aircraft manufacturing, but I think that in the process of further work it will be possible to arrive at certain decisions, additionally consider these problems and resolve them.

This budget is also called revolutionary, specifically in the part of changes in relations between the people, the state and business. As for the latter, the changes consist in the abolition of dozens of privileges and schemes for enterprises, the liquidation of free economic zones. What consequences will this lead to?

It is a positive fact that the government proposed that all business today operate on equal conditions. This is unequivocally a positive step. Because those privileges that were envisaged for individual sectors placed enterprises in unequal conditions. Thus, there was no question of equal competition. It is also important that the abolition of privileges leads to overcoming corruption and seriously limits the possibilities for embezzlement of state funds. That is, we are talking about the fact that today the "loopholes" in legislation are largely closed that gave an opportunity to a dishonest businessman to use this mechanism solely for his own enrichment. As for free economic zones, they were largely used by financial schemers to obtain super-profits, and were not directed either to the creation of jobs or to the opening of new production. Although in this case there is a risk that through such a mechanism the interests of real investors will be affected, therefore we proposed that the government develop a program of financial support through direct financing from the state budget.

Of course, the adopted main financial document of the state is not perfect – will amendments be introduced? And how justified was the package voting together with changes to certain other legislative acts?

The draft law "On Amendments to the State Budget of Ukraine for 2005," in addition to revising the revenue and expenditure parts, had a component of other legislative acts that affect the revenue part of the budget. These are the Law of Ukraine "On Value Added Tax," the Law of Ukraine "On Profit Tax" and other legislative acts. All these laws are directly connected with the revenue part of the budget. Their adoption by package voting is justified, because otherwise the balance between the revenue and expenditure parts would be disrupted, which could directly affect the reduction of expenditures for resolving social problems. Such practice has already been applied, and from my point of view it is correct, because if these laws were adopted separately, specifically the changes to the laws on taxes, there would be a threat of their non-adoption. After all, in the Verkhovna Rada there are representatives of various financial groups representing one or another sector, therefore each of them would fight to retain privileges and have the opportunity for further enrichment. At the same time, in my opinion, there are a number of gaps in the existing legislation that enterprises and organizations can use to minimize tax payments. Therefore, in the future I will insist on the adoption in the Verkhovna Rada of amendments to the Law of Ukraine "On Value Added Tax" and other laws that will bring positive results in terms of minimizing such opportunities and will positively influence the increase of the revenue part of the budget.

As is known, the problems of the regional budget regarding the receipt of state grants and subventions, the implementation of investment programs were recently justified by the fact that the majority of people's elected representatives from Volyn were in opposition. In view of the change of power in the country, how will this affect the regional budget and its filling?

Yes, the previous government headed by Yanukovych, under Kuchma's leadership, made decisions that contradicted both the laws and the Constitution of Ukraine, and primarily regarding the distribution of state budget funds. As an example, during the distribution of state budget funds for investment projects (capital investments in gasification, construction of educational, cultural, medical institutions) there were violations of the Constitution. The main principle of distributing these funds by oblasts was the presence of deputies of the so-called parliamentary majority that supported the previous government. Therefore, in Volyn as well, these funds were mostly directed to the constituency of people's deputy Ihor Yeremeyev and according to the proposals of people's deputies who were part of the parliamentary majority. And with the election of people's President Viktor Yushchenko, the issue of distributing state budget funds has been directed into a lawful and constitutional channel. After all, the President of Ukraine has defined the main principles of the new government's activity – these are honesty, transparency and openness. The first step in this direction has been made, because the funds directed from the budget primarily to investment projects are distributed not according to the principle of a people's deputy's belonging to one or another faction, but according to the number of population living in the oblast. Another matter – subventions, grants – are distributed according to formula calculation, which excludes the possibility of giving advantages to individual local budgets. As for the revenues of local budgets, including those of the Volyn oblast, first of all their filling has a direct dependence on the effectiveness of the work of the executive power and local self-government bodies.

Did you vote for the amendments to the budget?

Yes. I personally and the Ukrainian People's Party faction supported this draft law. Of course, the main argument when deciding to vote "for" or "against" was the argument regarding the increase in social payments. After all, it is specifically social problems in the state that are the concern of the Minister of Social Policy and Labor Viacheslav Kyrylenko, who is the deputy head of the Ukrainian People's Party. But I am convinced that in the adopted draft of the State Budget of Ukraine and the amendments to certain laws of Ukraine there are still a number of unresolved problems. Therefore, the task of both the Cabinet of Ministers of Ukraine and the Verkhovna Rada is to constantly improve the legislation of Ukraine in the future, the result of which should be a constant increase in the revenue part of the budget.