"Club of the damned" or what risks does Hetmantsev's bill on the "white business club" pose

The Chairman of the Committee on Finance, Taxation and Customs Policy, Danylo Hetmantsev, is trying to legalize the tool he invented to stop business operations - blocking tax invoices. To do this, he decided to create a "club of white business" and under the guise of fighting "shadow business" is trying to kill two birds with one stone - to quarrel the business environment and legalize the mechanism of business destruction. UNN decided to find out what Hetmantsev's club of the chosen ones is and what risks it may carry.

In the third quarter of 2023, a wave of tax invoices being blocked and business transactions being classified as risky swept across Ukraine. According to the Business Ombudsman Council, 57% of complaints from business representatives at that time concerned tax issues.

The issue of such a manual shutdown of business in a country at war was so acute that it was even brought to the attention of the National Security and Defense Council to preserve economic security. In January 2024, the NSDC instructed the Cabinet of Ministers  to immediately audit the system for monitoring risks and criteria for blocking tax invoices and the procedures and criteria for unblocking them.

It would seem that the government has heard the voice of entrepreneurs and is ready to change the system. However, international experts noted the deterioration of the situation with the blocking of tax invoices and adjustment calculations in February. 

"Since the end of last year, the situation with blocking the work of companies due to blocking the registration of tax invoices/adjustment calculations has worsened," the European Business Association reported  in response to a request from UNN. 

At the same time, the Association emphasized that the method invented by Hetmantsev is not available anywhere else in the world.

The absurdity has reached the point where tax authorities have blocked invoices even for EBA member companies.  The association added that any blocking is based purely on suspicion, which may not be justified. And unblocking through the State Tax Service or a court takes a long time.

More than two months have passed since the Cabinet of Ministers was instructed to conduct an immediate audit, but neither journalists nor the relevant parliamentary committee have seen their report. 

However, Danylo Hetmantsev used this time to his advantage. He has registered and is lobbying for a bill that would create a "white business club.

"The bottom line is that if an entrepreneur meets simple and transparent criteria for paying taxes above the industry average and earning a salary above the industry average, they are not subject to tax control in the form of inspections. This is among other advantages. The list is reviewed quarterly," wrote Hetmantsev on his Telegram channel.

His first post alone raised many rhetorical questions: what will happen to those who do not join the club of the elect? Will they be pressured by inspections and forced to pay even more? What about democracy, equal rights, etc.? Will businesses have to pay quarterly fees to get into Hetmantsev's "white brotherhood"? How much will a place on Hetmantsev's list cost? Are those who did not get into the club automatically black? Are they gray? Colored?

Experts interviewed by UNN also say that Hetmantsev's draft law creates discriminatory conditions for business. In particular, economist Yuriy Havrylechko emphasized that such a legislative initiative violates the Constitution of Ukraine and creates discriminatory conditions in business circles.

"First of all, we need to mention the Constitution and the fact that any discrimination in Ukraine is prohibited by law, the basic law. Therefore, the question for the CCU is whether we can have laws that directly contradict the Constitution. Because in this way, conditions are created for discrimination against other types of business entities and the initiative comes from the subjects of legislative initiative,  which, in my opinion, is unacceptable in principle. And all further discussions are meaningless, based on the fact that it is banally contrary to the Constitution," Havrylechko said.

It is possible that after the NSDC meeting was held and Hetmantsev saw that the "tax invoice blocking shop" might be closed, he took advantage of the time when the Cabinet of Ministers was pretending to be working hard and proposed rules that would legalize the scheme he had invented to classify companies as risky in the Tax Code.

Hetmantsev, in particular, proposes to return the work of tax nannies in Ukraine, but with the fashionable name of compliance manager. This official of the tax authority will be responsible for interaction with the taxpayer and will be given only to selected entrepreneurs. Only those taxpayers who meet certain standards, i.e., the "chosen ones", will have a tax nanny or compliance manager, and they will be determined by the tax authority itself on the basis of a risk management system, the criteria for which will be approved by the tax authority itself. 

"Under the guise of tax nannies for the elected, the authorities will try to legalize the right of the tax authorities to recognize a taxpayer as a risky one (this is provided only by a resolution of the Cabinet of Ministers) in order to stop the registration of their tax invoices, which in many cases has elements of tax raiding," Yuzhanina wrote in her Telegram channel.

That is, subjectivism and blocking business operations on orders will continue under the guise of the law. It's worth mentioning here that even Hetmantsev's colleagues in parliament say that it is unacceptable to stop business during the war.

"And the main problem is that the system that is working now is absolutely not designed for the realities in which businesses want to develop, open and stay in Ukraine.  Those who are now behind this pressure on entrepreneurs are outright enemies of Ukraine who are working to destroy the Ukrainian economy. And the government must urgently correct this," MP Oleksiy Honcharenko said in a commentary to UNN.

At the same time, according to his fellow parliamentarian Mykhailo Tsymbalyuk, the National Security and Defense Council should once again consider the issue of blocking tax invoices as one that threatens  Ukraine's economic security.

Such dual approaches will simultaneously help Hetmantsev to divide the business community. There have already been examples of entrepreneurs uniting in the fight against Hetmantsev and collecting signatures for his resignation. Back then, they almost succeeded in achieving their goal.

This time, the head of the tax committee decided to act proactively and create conditions that would divide business into castes and leave no chance for entrepreneurs to act as a united front.

"What do you mean by preferences for 'whites'? We don't have a situation where I want to pay more taxes, or I want to pay less. There are requirements - they are clear - the amount of value-added tax, income tax - they are defined, and you either pay them and there are no claims against you, or you don't pay them and there are claims against you. Therefore, this is a deliberate action to further muddy the waters, to further introduce misunderstanding into an already unstable economy and an unstable business environment. Business does not know what to do now and is rushing left and right to survive. To make things even more muddy, or to really create preferences for certain close business structures close to Hetmantsev or the authorities and play some games and scams with them," Serhiy Dorotych, head of the #SaveFOP movement, said in a comment to UNN.

If entrepreneurs don't unite now against the discriminatory draft law, those who get into the club will end up receiving the same questions and hateful comments that are directed at Hetmantsev and the government. And the "creative legislator" will be confident that, at the very least, he will not be threatened by business.