Within half a year business inspections brought the state budget UAH 2.4 bn in revenues

The creation of four "megacontrollers" is unlikely to allow businesses to breathe freely

Photo: Ivan Chernichkin

Since the beginning of the year public services, inspection bureaus and agencies have eased pressure on business. Over the first six months of 2014 the auditors from various authorities conducted 643,772 inspections, which is 9.2% less than in the first half of 2013, according to the results of a report published by the Federation of Employers of Ukraine (FEU) and drafted on the basis of monitoring of audits and inspections conducted by these departments. Surprisingly, having reduced the number of inspections, officials collected from companies UAH 2.4 bn in fines – which is nearly twice more than last year’s UAH 1.3 bn. It is evident in the report of the FEU that fewer fines were laid. Consequently, the amount of the “average bill” increased.

“Harvesting” leaders

The level of administrative actions against businesses has significantly increased this year. Compared to January – June 2013 this figure increased from 230,000 to 561,000 cases. Representatives of the FEU say that at the same time authorities are conducting more unscheduled inspections on behalf of the law enforcement agencies. “There is an enormous scope of activities for supervisors, given that the appeals filed by individuals and business entities may be the reason for the unscheduled inspections,” said General Director of the Alliance of Small, Medium and Privatized Enterprises of Ukraine Vyacheslav Bykovets.

Among the auditors, inspectors of the State Service of Emergency Situations were the most frequent guests of companies. They conducted more than 105,000 inspections. They are followed by the State Sanitary and Epidemiological Service and the State Veterinary and Phyto-sanitary Service. The Pension Fund was also among the main inspectors. The share of inspections conducted by the PF in connection with the liquidation of enterprises is 83%, according to the report of the FEU. Moreover, such a trend appeared for the first time, which indicates a significant level of the closure of businesses. “To some extent this explains the 9% decrease in the total number of inspections,” the report of the FEU reads. At the same time, the most penalizing are services under the control of the Ministry of Ecology and Natural Resources. They fined companies to the tune of more than UAH 932 mn.

Flimsy reform

There is a possibility that the second half of the year will be less stressful for companies in terms of communication with auditors. The government moratorium on inspections of businesses came into effect in August and will remain in force until the end of the year. It stipulates that companies can only be inspected upon an order of the Cabinet of Ministers or at the request of the business entity itself. An exception was made for the State Fiscal Service. Later the government drafted a resolution indicating the list of state departments that will be granted permission to conduct inspections. By the same decision, the Cabinet reserved the right of the courts to authorize the auditing of business entities.

“Shortly after introduction of the moratorium, we made a request to those enterprises that are members of our union to learn how the state agencies are observing the new rules. I must admit that the companies did not mention any violations of the moratorium,” said Bykovets. Besides, according to the source, this year there have been fewer complaints to the Expert Board at the State Service for Regulatory Policy and Development of Entrepreneurship. Bykovets says this also speaks in favor of the eased pressure on businesses.

Proving its intention to reduce the regularity of inspections, the government initiated a reform aimed at downsizing the number of regulatory bodies. In September, the Cabinet adopted a resolution, which cut the number of departments almost in half. However, according to Deputy Chairman of the Board of Directors of the FEU Oleksiy Myroshnychenko, attempts to optimize the structure of the government agencies will not make life easier for businesses, because duties of the liquidated services will be distributed among the remaining ones. “Thus, there will be four mega-control bodies that will be vested with huge powers in their domains,” said Myroshnychenko. In particular, this applies to the State Service for Food Safety and Consumer Protection, the State Service for Transportation Safety, the State Service for Drugs and Drug Control and the State Service for Labor Affairs. Each agency will control and supervise business instead of the eliminated bodies. Most importantly is that the new government agencies will not be subject to the government's moratorium, as they were established after the list of supervisors mentioned in the resolution was compiled.