The government will tighten up its agencies and strip departments of certain supervisory powers

The government does not see the need for supervisors from the State Inspection of Price Control and the State Inspection for Consumer Rights Protection

Photo: Konstantin Melnitskiy

Yesterday the Cabinet of Ministers approved the first stage of the reform aimed at the limitation of the powers of departments that control business. At the same time, there are plans to eliminate certain public agencies, duplicating each other’s functions and duties. “Now is the best time to reduce, liquidate and reorganize a number of the regulatory bodies,” said Premier Arseniy Yatsenyk at the opening of the Cabinet’s session. He added that after the first stage only 680 regulatory functions of public authorities of 1,032 will remain and of the 56 controlling functions of the central executive bodies only 27 will be preserved.

Surgery…with no anesthesia

The government announced the campaign for the reduction of government agencies in July. One of the proposals was to offer unpaid leaves to 70% of officials involved in the inspection of businesses. As the representative of the President in the Cabinet Oleksandr Danylyuk noted, at the moment the government has already cut expenses on inspectors, which were forced to take leaves. This happened after the government imposed a moratorium on business inspections until the end of the year. An exception was made only for inspectors of the State Fiscal Service. “This will help us develop a new regulatory framework and a new approach to the operation of regulatory authorities in a more orderly environment. The new authorities will no longer look like some repressive bodies,” said Danylyuk.

The final decision to abolish the agencies will be made later, during the second stage. As Vice Premier Volodymyr Groisman said, this decision should be preceded by a discussion with experts and business entities. In this case, Groisman said the country should abandon the “vestiges of the Soviet system, the State Inspection of Price Control (SIPC) being one of them”. “This function is not inherent in market economies,” read the conclusions of the working group that drafted recommendations for the reform. Moreover, as it was pointed out by the Vice Premier, the Anti-monopoly Committee will be able to fulfill the duties and functions of the SICP.

Downsizing will affect the State Inspection for Consumer Rights Protection, instead of which the government wants to create a single body at the Ministry of Economic Development and Trade. Now, as it was said in the Cabinet, the SICRP duplicates the functions of a number of other departments, which creates additional pressure on business and requires extra expenditures on maintenance of the public agency. Groisman also said that the government plans to create a single public service for transport security and authority for provision of energy supervision instead of the three existing bodies.

Hold on to the air

The government’s desire to reduce the army of state inspectors is primarily explained by the costs allocated for their maintenance whereas the effect of their jobs remains highly questionable. For example, according to the Federation of Employers of Ukraine, every year controlling bodies are allocated UAH 24.7 bn and the cost of a single inspection is approximately UAH 16,000.

At the same time, the burden on business is increasing. Based on government estimates, UAH 100 bn is annually hidden due to bribes. There was an attempt to regulate relations between business and auditors back in 2007 with the adoption of the Law On Basic Principles of State Control of Economic Activities. But as General Director of the Alliance of Small, Medium and Privatized Enterprises of Ukraine Vyacheslav Bykovets noted, over the past few years many changes have been introduced to the law that leveled the approaches stipulated in its original version. “The law no longer affects a large number of regulatory bodies. Some are still making attempts to do this. Last time they wanted to cancel the regulation according to which entrepreneurs shall be notified of planned inspections within 10 days,” says the interlocutor.

It is not surprising that even now, when the government started the reform of auditing policy, many departments are opposed to the future changes and the loss of pressure on entrepreneurs. In particular, the State Inspection for Consumer Rights Protection has suggested that the government allow it to hold unscheduled inspections of businesses that were previously banned before the end of the year.