Illegals: will the new bill help Ukrainian farmers to leave underground businesses?

In Ukraine, most farmers choose not to legalize their businesses because of a high tax. On August 10th, a bill was signed to help improve the situation, writes “Agro Center”.

73% of all milk in Ukraine is produced by small agricultural enterprises. Most farmers are not registered as official milk producers. Those who grow vegetables, fruits or berries for sale also choose to work illegally. What causes this situation? It’s simple – after the registration of their businesses, farmers have to pay a high tax, about 700 hryvnias a month. Therefore, private farms continue to work as underground businesses.

On August 10th, President of Ukraine Petro Poroshenko signed a new law on family farms.

Deputy Minister of Agrarian Policy and Food of Ukraine on farming development, Viktor Sheremeta, said that the number of registered farms in Ukraine is decreasing. However, Ukraine’s potential is about 1 million family farms.

“The changes will come gradually. Nowadays, people still don’t believe that it is possible to get state support without any problems. If they see that their neighbor has received state support, then they will consider legalizing their businesses. This transitional period will take about three years,”

said Sheremeta.

What does the new bill mean?

From now on, one can legalize a family farm according to the 4th group. It is a simplified system of taxation, accounting, and reporting. Under the new law, the state must compensate for the payment of the Single Social Allowance for 10 years. In the first year, the compensation will be 90% of the contribution, in the last year – 10%. In addition, a five-year moratorium is imposed on such enterprises.

The new law will apply only to farmers who process from 2 to 20 hectares. An entrepreneur’s family members only should work on a family farm: mother, father, husband or wife, children, brothers, and sisters.

It is important that those who work on registered family farms will have an official insurance record so they will be able to earn a pension.

“According to preliminary estimates, the above-mentioned innovation can stimulate the registration of underground businesses at the level of 10-15% when actively used,”

says the head of the secretariat of the Cabinet of Ministers’ Council of Entrepreneurs, Andrey Zablovsky.

Experts believe that in order for this bill to work, local authorities and banks should support small farmers and provide them with cheap loans so that they are able to raise funds and open their own business.