Valery Asadchev: A Ukrainian citizen must become solvent

PRAVDA.Ru had an interview with the people’s deputy of the Ukrainian parliament, the head of the sub-committee for the issues of the local budgets of the budgetary committee of the Ukrainian parliament, Valery Asadchev. This person is a member of the Committee for parliamentary cooperation between Ukraine and the European Union. Today, when the budgetary question in Ukraine is being widely discussed (the cabinet of ministers sent the draft-budget 2002 documents to the Ukrainian parliament Thursday), our correspondent asked several questions to Valery Asadchev.

Question: What do you think are the peculiarities of the 2002 budgetary process? Will the Ukrainian regions get enough money for the development? What are the perspectives?

Answer: Draft budget 2002 is an interesting document. It has been based on the ground of the budget code, which stipulates for the change of the entire character of cooperation between the central and local budgets. Up until now the budget-making process had the so-called vertical of the budgetary resources. In other words, the financial indexes were formed in the state budget and then they went down to the level of a region, a district, a city and so on. At present moment we do not have that vertical organization.

The passed budget code has fixed the taxes for every budget, both the state and local ones. The destruction of the budgetary resources vertical is a very positive issue. This gives an opportunity for the regions to approve their local budgets immediately after the budget of Ukraine is approved. A city will not have to keep waiting for the regional council to go through long discussions, approving this and disproving that. The procedure is now a lot easier, more transparent and understandable.

When calculating the revenues and the spending of the local budgets, there was a formula approach widely used in that. In connection with that, a sum of subsidies was set in a very precise way (if this is a recipient budget) or a sum of withdrawal (for budgets-donors). And this subsidy or a withdrawal was of the address character, without the use of the vertical. However, the formula approach, as it is now, is not ideal. The system of calculation is a very complicated one. In spite of the fact that draft budget 2002 can not be considered a perfect one, this draft is anyway a considerable step forward. For example, the new draft budget gives the new chance for development to the regions, since it has a significant incentive effect. The local budgets will have their own revenues, which will not be registered in the scheme of transfers. They get what they get, so to speak. This and some other positive aspects of the new budget will give more independence to the regions, it will become a good reason for the development of the Ukrainian economy. This new budget is based on the ground of the Budget code for the first time, on the ground of the economic, macroindexes, which determine the constant growth of the Gross Domestic Product. For the first time the budget is being formed by the new government.

Q: The budgetary committee found the extra funds totalling three billion hryvnas. To what extent is this money real?

A: This money is real. There are three aspects in it. The revenues have increased some 1.2 billion hryvnas – owing to the funds from the privatization (like it was regulated by the Budget code). The government planned this sum to clear the basic part of the debt. So this money is real and the government does not deny it, but the money was scheduled for another purpose by the government. The committee offered to set the deficit of the budget on the level of 1.8 billion hryvnas, taking account of the growing GDP and considerable reduction of the amount of the state debt. The increase of the revenues towards the deficit of the budget and the increase on separate sources of the revenues is not an indisputable issue, but the budgetary committee is ready to look for an optimal decision together with the government.

Q: The head of the budgetary, Alexander Turchinov is currently charged of all deadly sins, they demand he should leave his post. Some observers say, this was a revenge for the found 3 billion hryvnas.

A: As you know, the question with Turchinov has been solved positively. He kept his position. I am personally happy about it, for I think he is a good specialist. As far as the reasons of this question to appear, then that’s the way politics is. The money, found by the committee, does not have anything to do with it.

Q: What is the sum of the “money in the shadow?” They say Ukraine lives with three budgets in a row – the official one, the shadow budget and the same amount of money is taken abroad annually. Are there any evaluations?

A: What can be said about the shadow budget. This is the way it is called – a shadow budget, which means, you can not calculate how much money it has. Some experts say the figure is 50-70% of the monetary funds.

Q: How much money does Ukraine need for “happiness?” Did anyone calculate?

A: You have to distinguish the notion of “happiness” and “complete happiness” here. You can not ever have enough money for “complete happiness.”

Q: The parliamentary elections are coming up. Will some political forces try to use the budget funds for their own promotion?

A: Of course there will be some attempts to do so. Let us take the latest elections as an example. Ukraine was on the edge of the default, because of the use of the public funds. The bankruptcy of the Bank Ukraine is also a mechanism to get money from the state treasury – not the only one scheme for getting access to the public money. I am certain, the coming elections are not going to be an exception.

Q: What is your attitude towards the system of taxes in Ukraine?

A: Everybody is out there screaming about the reform of the tax system, about the cancellation of the value-added tax. It is an easy thing to do – to talk about it, but it is very hard to do it. Not the juridical, but presumably natural persons fill the budget in the developed countries. If you, for example, take the USA’s budget, then you will find out that the most powerful corporations, which deal with millions of dollars, bring only 8% of revenues to the budget. The working Americans fill it with more than 40%. The same is paid to the mandatory social funds. So the ground of the American economy is a tax-payer, a working person. So the system works to provide as many jobs there as possible. If the sate guarantees a job, then the economic system will work and a person will be able to satisfy his or her social needs. The system of this kind must be created in Ukraine too. One has to make a Ukrainian citizen solvent. Then the budget will be receiving the revenues, the people will become richer.

Q: Specialists calculated that by 2005-2006 Ukraine will experience a catastrophe with the basic funds. Everything will be out of order - the railways, the electric networks, pipelines, the housing resources. All at once at about the same time. Will the state have enough funds to fight with this natural process?

A: This is a relative issue. Another question should be raised in this respect – was there a need in such big costs? Why were those big basic funds needed? The assessed value of the basic funds is huge. As it just so happens that this sum is often economically unprofitable. For instance, the defense enterprises. The unlimited funds have always been spent on them, as well as the land. It cost a lot to maintain the basic funds. So how should we maintain and pay them now? Fortunately, the latest indexes give us a hope. An Owner is getting into a shape in Ukraine. This will give birth to the new kind of people – those, who will want to work and who know how to earn money. That is why I am sure we will not experience a catastrophe.

Q: Are you looking optimistically into the future? Or…?

A: Of course I am being optimistic. What else can be? How can we work then? And what for, if you do not believe in the good of the things you do? Moreover, I am optimistic even towards pessimists.

Valery Asadchev was interviewed by Andrey Lubensky PRAVDA.Ru Ukraine

Read the original in Russian: http://www.pravda.ru/main/2001/11/23/34148.html