Expert: introduction of joint responsibility could discourage effective businesses
The introduction of joint responsibility, by which part of the single social contribution would be used to pay wage arrears at state-owned enterprises, could discourage effective enterprises and individual entrepreneurs, Denys Chernikov of the Laboratory of Legislative Initiatives said, commenting on the initiative announced by Vice Prime Minister and Minister of Social Policy Serhiy Tihipko. His commentary was prepared with support from the European Program of the International Renaissance Foundation.
He pointed out that in the last two years wage arrears in the Ukrainian economy declined by nearly 60%, regardless of form of business ownership. The expert believes the government should analyze what tools (other than redistribution of social contributions) could be effective in paying these debts.
“With regard to the government’s initiative to introduce joint responsibility, it is essentially state aid of unprofitable or bankrupt enterprises,” he explained. “It creates a precedent whereby effective, profitable business will have to subsidize non-working enterprises. Awareness of this may negatively effect labor productivity or become an incentive to operate in the shadow.”
He believes that such risks can be avoided by applying principles of state aid common in the EU:
– transparency: disclosure of assistance to pay wage arrears and publication of a list of enterprises that receive such assistance;
– changing the behavior of the recipients: providing assistance so that enterprises correct systemic problems and will not require such assistance in the future.
Laboratory of Legislative Initiatives
Denys Chernikov
Chernikov@laboratory.kiev.ua
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The essential role of the European Program lies in promotion of Ukraine’s European integration, combining external pressure of the EU with the domestic one of the Ukrainian civil society, and thus contributing to promotion of open society values in Ukraine.
