Regions Pushes to Renew Tax Privileges, Import Duties.

Parliament’s budget committee, headed by Regions MP Nikolai Azarov, voted on Friday to recommend restoring tax privileges to special economic zones, priority development areas and technology parks. The Tymoshenko government eliminated all such zones in March 2005, including several in the Donbass region that accounted for most of the tax discounts claimed. The committee also recommended capping the central budget at 30% of GDP, which Azarov said was 2.5% below this year’s figure and would relieve UAH 10 bn of tax pressure on the economy, mostly in tax-privileged zones. The committee also recommended to restore the levels of import duties that prevailed until 2005 (the Tymoshenko government lowered most duties); increase spending on social benefits and housing; “stimulate exports”; and “develop a strategy” to reduce the corporate profit tax to 20% and value added tax to 17% (from current rates of 25% and 20%, respectively). Viktor Yanukovich, the Regions leader, said that stimulating exports would include changing the central bank’s monetary policy. Tom Warner: The Regions party’s aggressive stance makes it less likely that Yushchenko will approve Yanukovich’s nomination. In a nutshell, Yanukovich and Azarov have declared that they want to devalue the hryvnya, restrict imports, put off WTO membership indefinitely and go back to a tax system that favors heavy industry and particular industrial groups. It is looking more likely that Yushchenko will neither dissolve parliament nor approve Yanukovich’s nomination, and instead let the political crisis drag on.