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Inflation is a depreciation of funds. Inflation is, in simple words, when you bought 10 goods this month for UAH 10,000, and in the next month you will buy only 9 for the same amount. Or, for example, when you could buy a 100-square-meter apartment for $50,000, and now only 70 meters. Unfortunately, not everyone in Ukraine understands what inflation is. This hits the pockets of those people who accumulate hryvnia and do not invest it in more solid things (currency, real estate, etc.) the most. Everyone should understand that out of 100,000 hryvnias in the reserve, after a year 90 will remain, because no one has canceled inflation and it has not disappeared anywhere. The same applies to other countries, not only Ukraine.
Inflation is measured as a percentage. The normal percentage for the usual state of things is up to + 10 percent per month. In Ukraine, the calculation of the inflation indicator is carried out by the State Statistics Committee of Ukraine – Derzhstat. The State Statistics Service publishes the inflation index monthly on its publicly accessible website. This calculation is carried out according to a simple algorithm, the value of the consumer basket is taken, which includes about 300 units of products that directly affect the life of every citizen, and the prices for the past month are simply compared, by how many percent the price has increased – this is also the inflation index, if the price fell, that’s deflation.
By the way, you need to remember that the employer is obliged to compensate the interest to the salary in accordance with the inflation indicators, or for example, or if you, for example, lent money, then you have the right according to Art. 625 of the Civil Code of Ukraine to return the amount plus interest for inflation. Again, not everyone knows about this!
Inflation in Ukraine for 2022, in a country that is at war, and where almost half of production and business does not work, inflation is only 26 percent. For example, in 2014, when there was a Maidan of Dignity, inflation was at the level of 42 percent. For example, in the Baltic countries (Estonia, Lithuania, Latvia), which are not at war, inflation in 2022 was at the level of 20-23 percent, roughly the same as in our country at war. The smallest in France in the area is 6 percent.
The main causes of inflation in Ukraine:
- The main cause of all inflation is the emission of funds. This is when, in simple words, you just turn on the machine and print. When the state does this, it is a collapse. This will lead to the fact that in a month, for example, when it will cost not 20 hryvnias, but 1000. And so on.
- Reduction in production. At the same time, there can be various reasons, for example, poor state regulatory policy, poor tax regulation, the outflow of personnel to other countries, high import dependence, etc. Well, the main thing is war. Of course, war destroys production!
- Poor quality state regulation. It partially overlaps with a decrease in production and poor financial regulation, for example, a sharp issuance of cheap loans, a sharp increase in private loans, attempts by the state to regulate prices instead of market ones.
Well, first of all. What is default? Default is a state in which the state cannot pay its obligations. First of all, it concerns external loans. Well, of course, this is when the state cannot pay domestic debts (ZP, interest, etc.). In essence, this can be compared to the bankruptcy of a natural person, in the worst case, the authorities will be removed, they will be held accountable, all debts will be written off and we will start with a clean slate.
Today in Ukraine, this is 100 percent impossible! As of today, we are very far from default, moreover, we are developing rapidly, especially in the field of IT (which is worth our Diya only, which is a leading product in all of Europe, and our companies Nova pochta, Uklon, Ajax, Konsultant (consultant.net. ua)), military tech – Ukraine will be the hub of military equipment in the world, which means millions of dollars of investments, our agricultural sector, our natural resources.
In a word, default is impossible!
What needs to be done to reduce inflation and prevent default in Ukraine in 2023?
If you look at the root of the problem, the main task of the state is to increase national production and the flow of foreign funds to Ukraine. At the same time, this applies to all areas, not only the ones I mentioned. Yes, and what is needed for this.
Regulation of tax legislation, with the aim of creating the most attractive conditions for business around the world.
Well, first of all, this is the creation of low-tax zones, one might say offshore. This will make it possible to attract businesses from different countries, which will pay taxes for their place of registration, that is, in Ukraine.
And now, for this is the perfect time, even if there was no war, our European colleagues would not let us do it, because their business, which pays taxes in Germany, France, Austria, would transfer to us with their taxes, and you you understand how it would be perceived. And now there is a war, we have kartblange. It’s the perfect time to do it. Moreover, the territory of Ukraine is large, we will be able to accept everyone who is ready to pay taxes here. Moreover, there are industries such as military-tech (drones, surveillance equipment, military protection, various types of weapons) – Ukraine today is an ideal country for the infusion of foreign capital, for production here, because Ukraine is a large customer financed by the whole world.
In addition, we need to put order in our tax system, which is already working. Over the past 2 years, how many times have the leadership of tax authorities changed, new law enforcement agencies have been created – the Bureau of Economic Security, and still it is not possible to bring business out of the shadows. I am convinced that the state is choosing the wrong vector.
Business should be brought out of the shadows, not by coercion, but by encouragement. For example, a year ago there were scandals with VAT rolls, the rolls were overcome so that all live business is now blocked and no one can work, this will be confirmed by any manager of a large enterprise. Well, it’s not normal, is it? This gives rise to another corruption scandal, with millions of cash in the hands of tax service employees.
And one more thing, the state should change its approach to taxation. Today in Ukraine, anyone pays taxes as they wish, and the state itself has created such conditions. For example, you can create an LLC and pay 45 percent of the income, or you can register 10 FOPs per employee and pay 2 percent. Everyone knows and understands this, but for some reason they do not change it. This approach forces the business to break down into smaller ones in order to pay less. And you need to follow the usual wholesale principle, the more you pay, the lower the tax. For example, if you have a turnover of 1 million, you pay 10 percent, if you have 100 million – 9 percent, etc. And not the other way around, as is happening now.
The super idea was with a preferential tax – 2 percent, this is really a step towards meeting business.
I support the initiative of deputies from the Servant of the People on the 10-10-10 tax, which is 10 VAT, 10 income tax and 10 single social contribution. Today is 20-18-22.
Fighting corruption and changing the civil service.
I believe that the state is still on the wrong path here. All state measures are aimed at strengthening responsibility, new law enforcement agencies are being created: NABU, SAP, DBR, SBU, etc. They all work selectively, some are caught, some are not. This is how corruption cannot be overcome.
Of course, violations of the law must be punished, quickly and publicly, so that others can see.
But the main task for me is to completely change the civil service. A civil servant must have social guarantees (housing, preferential loans, free sanatoriums, recreation centers, free treatment, etc.), wages are tied to efficiency, and not the same for everyone (for example, for an exposed corrupt official, an allowance in the amount of one percent of the amount received to the budget, or if you are a teacher – a bonus to have enough for a car – if you have the average score of students, the highest in the district) and the principle according to which, if you are fired, you lose everything acquired in the civil service, so that everyone values the position.
Change the mobilization policy.
I believe that every Ukrainian who pays taxes should work and increase production. Here we are talking about reservation, currently according to Article 23 of the Law on Mobilization and Mobilization Training, only employees of strategic enterprises are not subject to mobilization.
I think it would be more expedient to create private military companies on a contractual basis with foreigners. Today, Ukraine is supported all over the world, I am sure that many people in the world who know how to fight or are motivated by an empty salary or patriotism will gladly join the ranks of the Armed Forces. And Ukrainians who pay taxes and create a national product – let them work. You can simply raise the tax barrier, for example, if the same FOP pays 10-20 thousand per month in taxes, let it work more usefully on its front.
By the way, just recently, the Cabinet of Ministers allowed to book employees of the IT sector – residents of DIA CITY. This is a good initiative.
State support of Ukrainians.
Today, because of the war, many Ukrainians are leaving Ukraine, and they are taking their capital out of Ukraine in every possible way. What can be exported is exported, what can be sold is sold, transferred to the crypt and taken abroad. It is bad.
And the main thing is people, about 14 million Ukrainians left. Without people, without personnel, any business cannot work. These people should be returned, but not by coercion, not by mobilization, but by encouragement.
The state is taking steps in this direction, in particular, E loans for production, E housing, etc. This is commendable, but it is not enough.
Confiscation and quick conversion of all Russian property into funds in Ukrainian accounts.
Here in Ukraine, we should have already done it and, by our own example, shown the whole world the mechanisms of confiscation and sale of the property of the aggressor country.
And Ukrainian diplomacy should take maximum measures aimed at ensuring that all frozen assets abroad, the closest ones, become the property of Ukraine.