Financial incentives for post-war recovery and development of enterprises

Rohov Heorhiy
Doctor of Economics, Professor, Head of Finance Department, Admiral Makarov National University of Shipbuilding, Ukraine, e-mail: gekoro7@gmail.com, ORCID ID: https://orcid.org/0000-0002-2487-0946

Cite this article:

Rohov, H. (2023). Financial incentives for post-war recovery and development of enterprises [Finansovi stymuly povoiennoho vidnovlennia ta rozvytku pidpryiemstv], Socio-economic research bulletin, Vìsnik socìal’no-ekonomìčnih doslìdžen’ (ISSN 2313-4569), Odessa National Economic University, Odessa, No. 1-2 (84-85), pp. 66–81.

Abstract

The article investigates the financial aspects of the enterprises functioning in the economic realities resulting from the large-scale overt Russian aggression against Ukraine. The subject of the study is the stimulation of business investment activity in micro-regions and territorial communities that have suffered the most as a result of hostilities or temporary occupation that is in the territories of recovery within the meaning of Article 11-2 of the Law of Ukraine on the Basics of State Regional Policy. The article’s purpose is to develop a system of financial incentives for the companies’ development in the territories of recovery in the post-war period. The study was conducted based on risk analysis methodology. The risks of applying financial incentives provided for by the legislation of Ukraine or successfully used in practice in the countries of the European Union are identified, methods of preventing their occurrence are proposed, and possible results are identified. The comparison of the risk analysis results made it possible to conclude that it is expedient to systematically apply partial compensation for the cost of attracting investment loans, accelerated depreciation, lowering the income tax rate, as well as exemption from VAT taxation and payment of duties on imports of machinery, equipment, and components for the export production. The practical implementation of the proposed financial incentives system for the developing enterprises of priority types of economic activity in the recovery areas will help increase their equity and borrowed capital and invest it in the modernization of production and renewal of non-current assets. The effect of the incentive system application depends on the business environment's defects, such as the judicial system imperfection, administrative pressure on business, a significant level of corruption, and monopolization of markets. The prospect for further research is the developing methods for balancing the state budget under temporary stimulation of enterprises in the recovery areas.

Keywords

stimulation; recovery territory; risk analysis; tax and customs benefits; interest rate compensation on investment loans; solidarity contribution; accelerated depreciation.

JEL classification:G380; O230; DOI:https://doi.org/10.33987/vsed.1-2(84-85).2023.66-81

UD classification: 336:338.24

References

1. Price indices [Indeksy tsin], Derzhavna sluzhba statystyky Ukrainy: sait. Retrieved from: https://www.ukrstat.gov.ua/express/expr2023/01/01.pdf [in Ukrainian]
2. Official hrivnya exchange rates [Ofitsiinyi kurs hryvni shchodo inozemnykh valiut], Natsionalnyi bank Ukrainy: sait. Retrieved from: https://bank.gov.ua/ua/markets/exchangerate-chart [in Ukrainian]
3. State budget of Ukraine [Derzhavnyi biudzhet Ukrainy], Ministerstvo finansiv Ukrainy: sait. Retrieved from: https://index.minfin.com.ua/ua/finance/budget/gov [in Ukrainian]
4. Pidorycheva, I. (2022). Post-war recovery of Europe: Experience and lessons for Ukraine. Journal of European Economy, Vol. 21, No. 2, pp. 170–187. DOI: https://doi.org/10.35774/jee2022.02.170.
5. Andersson, P. F. (2017). The impact of experts on tax policy in post-war Britain and Sweden. Acta Oeconomica, Vol. 67, pp. 79–96. DOI: https://doi.org/10.1556/032.2017.67.S.7.
6. Yoo, I. (2000). Experience with tax reform in the Republic of Korea. Asia-Pacific Development Journal, Vol. 7, No. 2, pp. 75–104.
7. Lee, J. W. (2001). The Impact of the Korean War on the Korean Economy. International Journal of Korean Studies, Vol. 5, No. 1, pp. 97–118.
8. Reinert, E. S. (2019). How rich countries got rich... and why poor countries stay poor. Hachette U: Public Affairs, 387 p.
9. On the National Council for the Recovery of Ukraine from the Consequences of the War: Law of Ukraine, No. 266/2022, 21.04.2022 [Pro Natsionalnu radu z vidnovlennia Ukrainy vid naslidkiv viiny: Ukaz Prezydenta Ukrainy, No. 266/2022, 21.04.2022]. Retrieved from: https://www.president.gov.ua/documents/2662022-42225 [in Ukrainian]
10. Vinokurov, Ja. (2022). Cash tax and VAT refund guarantee: 10-10-10 reform is back on the agenda. What’s new? [Podatok na hotivku ta harantiia vidshkoduvannia PDV: reforma «10-10-10» znovu na poriadku dennomu. Shcho tam novoho?], Ekonomichna pravda. Retrieved from: https://www.epravda.com.ua/publications/2022/12/26/695422 [in Ukrainian]
11. Kytaichuk, E. (2022). Prospects and disadvantages of radical tax reform [Perspektyvy ta nedoliky radykalnoi podatkovoi reformy], Ekonomika ta suspilstvo, No. 42. DOI: https://doi.org/10.32782/2524-0072/2022-42-26 [in Ukrainian]
12. Krysovatyy, A. I. & Valigura, V. A. (2022). Tax legislation of Ukraine under the conditions of martial law [Novatsii ta napriamy vdoskonalennia podatkovoho zakonodavstva Ukrainy v umovakh voiennoho stanu], Finansy Ukrainy, No. 6, s. 33–53. DOI: https://doi.org/10.33763/finukr2022.06.033 [in Ukrainian]
13. Kozyuk, V. V. (2022). Post-war inflation targeting: key challenges [Povoienne tarhetuvannia infliatsii: kliuchovi vyklyky], Ekonomika Ukrainy, No. 10, s. 15–34. Retrieved from: http://economyukr.org.ua/docs/EU_22_10_015_uk.pdf [in Ukrainian]
14. Kindzerskyy, Ju. (2022). Postwar recovery of Ukraines industry: challenges and features of policy [Povoienne vidnovlennia promyslovosti Ukrainy: vyklyky ta osoblyvosti polityky], Ekonomichnyy analiz. Vol. 32, No. 2, s. 101–117. DOI: http://dx.doi.org/10.35774/econa2022.02.101 [in Ukrainian]
15. Antoniuk, V. P. (2022). War-induced human capital losses as a threat to the post-war modernization of Ukraine’s economy [Vtraty liudskoho kapitalu vnaslidok viiny yak zahroza povoiennii modernizatsii ekonomiky Ukrainy], Ekonomika Ukrainy, No. 8, s. 20–33. DOI: https://doi.org/10.15407/economyukr.2022.08.020 [in Ukrainian]
16. Perehudova, T. V. (2022). Consequences of the War in Ukraine for the National Labor Market, Directions of Employment Support [Naslidky viiny v Ukraini dlia natsionalnoho rynku pratsi ta napriamy pidtrymky zainiatosti], Problemy ekonomiky, No. 2, s. 184–191. DOI: https://doi.org/10.32983/2222-0712-2022-2-184-191 [in Ukrainian]
17. Heyets, В., Podolets, Р. & Diachuk, О. (2022). Post-war economic recovery of Ukraine in the imperatives of low-carbon development. Science and Innovation, Vol. 18 (6), pp. 3–16. DOI: https://doi.org/10.15407/scine18.06.003.
18. The concept of the post-war reconstruction and development strategy of Ukraine [Kontseptsіia stratehii povoiennoho vidnovlennia ta rozvytku Ukrainy], National institute for strategic studies: website. Retrieved from: https://niss.gov.ua/sites/default/files/2022-05/stratvidnovlennya-koncept-v2.pdf [in Ukrainian]
19. Ivanov, S. V. (2019). Economic recovery and development of countries after armed conflicts and wars: Ukraine’s opportunities that have not lost yet [Ekonomichne vidnovlennia i rozvytok krain pislia zbroinykh konfliktiv ta voien: nevtracheni mozhlyvosti dlia Ukrainy], Ekonomika Ukrainy, No. 1 (686), s. 75–89. Retrieved from: http://er.dduvs.in.ua/handle/123456789/6678 [in Ukrainian]
20. Project of the Recovery Plan of Ukraine: Materials of the working group «Recovery and development of the economy», July 2022 [Proekt Planu vidnovlennia Ukrainy Materialy robochoi hrupy «Vidnovlennіa ta rozvytok ekonomiky», lypen 2022], Natsionalna rada z vidnovlennia Ukrainy vid naslidkiv viiny. Retrieved from: https://www.kmu.gov.ua/storage/app/sites/1/recoveryrada/ua/economic-recovery-and development.pdf [in Ukrainian]
21. On the fundamentals of the state regional policy: Law of Ukraine, No. 156-VIII, 05.02.2015. Updated: 27.02.2022 [Pro zasady derzhavnoi rehionalnoi polityky: Zakon Ukrainy, No. 156-VIII, 05.02.2015. Data onovlennia: 27.02.2022]. Retrieved from: https://zakon.rada.gov.ua/laws/show/156-19#Text [in Ukrainian]
22. Survey of foreign investors [Opytuvannia inozemnykh investoriv], Dragon Capital: sait. Retrieved from: https://dragon-capital.com/ua/media/foreign-investor-survey [in Ukrainian]
23. About government support for investment projects with significant investments in Ukraine: Law of Ukraine, No. 1116-IX, 17.12.2020 [Pro derzhavnu pidtrymku investytsiinykh proektiv iz znachnymy investytsiiamy v Ukraini, No. 1116-IX, 17.12.2020]. Retrieved from: https://zakon.rada.gov.ua/laws/show/1116-20#Text [in Ukrainian]
24. On approval of the Procedure for exercising control over the use of released funds of enterprises – aircraft manufacturing entities, which are subject to the provisions of Article 2 of the Law of Ukraine «On the Development of the Aircraft Manufacturing Industry»: Resolution of the Cabinet of Ministers of Ukraine, No. 476, 07.06.2017. Updated: 11.11.2021 [Pro zatverdzhennia Poriadku zdiisnennia kontroliu za vykorystanniam vyvilnenykh koshtiv pidpryiemstv – subiektiv litakobuduvannia, na yaki poshyriuietsia diia norm statti 2 Zakonu Ukrainy «Pro rozvytok litakobudivnoi promyslovosti»: Postanova abinetu Ministriv Ukrainy, No. 476, 07.06.2017. Data onovlennia: 11.11.2021]. Retrieved from: https://zakon.rada.gov.ua/laws/show/476-2017-п#Text [in Ukrainian]
25. On the development of the aircraft industry: Law of Ukraine, No. 2660-IІІ, 12.07.2001. Updated: 01.01.2017 [Pro rozvytok litakobudivnoi promyslovosti: Zakon Ukrainy, No. 2660-IІІ, 12.07.2001. Data onovlennia: 01.01.2017]. Retrieved from: https://zakon.rada.gov.ua/laws/card/2660-14 [in Ukrainian]