Parliament fails to support mandatory e-register delay amid protests

Close to one
thousand individual entrepreneurs (known as FOPs) gathered at the parliament
building on Nov. 17 to demand approval of legislation to delay the introduction
of state-issued electronic cash registers. They sought to delay the cash
register requirement for one year because it would add a monthly USD 14.21
burden to their expenses, as well as an added time burden of entering and
managing data in the registers. The registers also would require the hiring of
accountants and would be subject to tax inspectors. “We are the single country
in the world during the pandemic that began to tighten the screws on small
business, on the middle class, and take away even what they had,” Yulia Tymoshenko,
the head of the Fatherland faction, said from the parliamentary tribune that
day.

Yet that afternoon,
parliament failed to muster enough votes to support the delay, drawing only 17
votes after the legislation was endorsed by the Fatherland faction and the For
the Future group of MPs. The parliamentary tax committee had also endorsed the
bill earlier that day. The failed vote prompted protesters to attempt to storm
the building, which was thwarted by police. They had blocked the street
adjacent to the building that morning.

About 51% of the
public believes that the introduction of electronic cash registers means the
introduction of order in the sphere of tax payments, while about 37% are
convinced that it’s pressure on small business, according to poll results
published on Nov. 10 by the Rating Sociological Group. Of those who believe its
pressure on small business, 63% are themselves entrepreneurs, the poll said.
The poll was conducted between Oct. 29 and Nov. 2 among 2,000 respondents.

Ukrainian President
Zelensky signed on Oct. 18 legislation requiring that individual entrepreneurs
(FOPs) use state-issued electronic cash registers in their accounting. The
legislation included a cashback provision – opposed by entrepreneurs – in which
a buyer receiving an inaccurate receipt (for a good worth at least USD 30.22)
can file a complaint with tax officials and receive cash back of at least 150%
of the good’s value, if the receipt’s fraudulence is proven.

Zenon Zawada: While this sphere of economic activity
certainly needs better accounting (along with other spheres like property and
income tax payments), we agree that certain conditions of the legislation (like
new accounting requirements, as well as the involvement of certified
accountants) can ruin the activity of many small businesses, which don’t have
the funds or time to handle the additional burdens. In order for entrepreneurs
to comply with new tax and accounting innovations, the government needs to
create more incentives than disincentives. We expect informal black markets
will emerge among those entrepreneurs who have the supply chains for goods that
are in demand. And some entrepreneurs will find it easier to simply play bribes
to authorities, rather than dealing with the hassles of e-registers.

The support for e-registers by Zelensky and The People’s Servant party
has likely been a factor in their falling poll ratings (in addition to their
lack of resolve on geopolitical matters, including the inability to resolve the
war in Donbas). These newly imposed conditions, as well as the weekend
lockdowns, will simply prompt more entrepreneurial Ukrainians to seek work
abroad, or engage in political opposition if they can’t leave.