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All we need is FREEDOM!

authors: Alexander Shemiatkin, Marianna Kazatska

19 June, 2019 Exclusive

A human being is free by nature. (I. Kant)

Ukrainian utopia … What is it like? Everyone has their own comprehension. Yet this utopia is difficult to imagine without freedom, since the reflex of freedom is a characteristic reaction of all living beings, the most important of the innate instincts (I. Pavlov). It is not surprising that the main reason for the collapse of the Soviet Union is the total suppression of freedom.

The post-Soviet evolutionary development of Ukraine can be described as the biblical walking of Jews in the desert until the last slave dies. This period of “purification”, the period of “dying slaves”, was accompanied by the side Conglomeration Effect in the form of post-Soviet legislation and a Soviet bureaucratic machine.

The actual freedom of the individual develops slowly than his idea of freedom. (A. Camus)

The Ukrainian society, which evolutionarily changes its attitude towards freedom, is in constant conflict with the Conglomerations, which are always archaic in relation to society. The results of the last presidential elections are a direct consequence of this conflict. A society with new horizons of freedom has already begun the lustration process towards archaic politicians, and, by and large, the entire state bureaucracy. It can be assumed that only now Ukraine is on the path that the Baltic countries and Poland began thirty years ago.

The flip side of freedom is responsibility. It is the test for the level of responsibility (on a scale from irresponsible to responsible) that shows the level of freedom. What can be said about the level of responsibility in Ukrainian society? How many Ukrainian politicians resigned or left politics as a result of political responsibility? How many corrupt officials quit voluntarily because they took bribes? Has at least one employee of the Ministry of Economic Development and Trade of Ukraine or the Ministry of Finance of Ukraine assumed their responsibility for the status of our country as «the poorest country in Europe» and consequently resigned?

The idea of law is freedom. (V. Hegel)

Freedom as one of the highest social values was not included in the final wording of Article 3 of the Constitution of Ukraine. We should agree with V. Rechitsky that the Constitution of Ukraine retains a paternalistic connotation. Article 64 of the Constitution of Ukraine provides that constitutional rights and freedoms can not be restricted. Thus, freedom is narrowed to the limits determined by the Constitution. As a result, there is a shift from the law of nature towards the rule of law. This approach coincides with the idea of S. Montesquieu, who pointed out that in a society where there law prevails, freedom can only involve doing what you want and not being forced to do what you should not (by law) want.

If we proceed from the fact that understanding of freedom has developed in an evolutionary way, and our legislation operates with an approach defined in the 18th century, then Ukraine’s century-long lag behind developed countries has deep roots in the state of freedom of our society.

Freedom is the cognized necessity. (B. Spinoza)

Concurrent existence of the Economic and the Civil Codes in Ukraine is a vivid example of the inability to accept new horizons of freedom without an internal request for it. In its free spirit, the Civil Code of Ukraine has outpaced the realization of freedom by the post-Soviet bureaucratic apparatus. Therefore, the officials had the need to accept simultaneously something that is congenial to the Soviet Union – the Commercial Code, which archaic nature is indisputable against the background of the Civil Code of Ukraine.

It is impossible to apply the tools of civilized countries in Ukraine, if the Ukrainian society has not yet evolved for it. No matter how much anti-corruption bodies will be created, the essence of it will be the people working there with a corresponding view of responsibility and duty. Therefore, those who claim that corruption in Ukraine can be defeated solely by removing the conditions for its existence, rather than chasing corrupt officials, are right.

Due to the development of technology, the availability to visit the developed countries, we have learned their standards of living. Now we stil have to realize that a degree of freedom separates us from these standards. Therefore, all ideas that are worthwhile to follow, should be related to the development of our freedom and the destruction of everything that restricts it. The average “temperature” of awareness in the country should rise before we can reach the Western level in legislation and public administration, i.e. make freedom as the highest social value. It is fair to say that the West has been reaching these standards for centuries. We need to develop in leaps and bounds.

Only in conditions of freedom can the energy of the individual manifest in its entirety. Freedom is the mainspring of human perfection. (B. Chicherin)

Freedom is an exceptional opportunity to act, the absence of external obstacles to movement. Such external obstacles include excessive bureaucratization, low quality of legal provisions, excessive tax burden. The destruction of Conglomeration is the primary task of state authoties if they truly follows the idea of freedom. Only those solutions that destroy the Conglomeration can be called WOW-solutions for Ukraine.

WOW-solutions are decisions based on the idea of freedom.

The constant feeling of the presence of law enforcement bodies, illegal takeover and unpunished rewriting of information in the registries about the owner – these all are freedom restriction forms. Therefore, the WOW-solution will be immediate liquidation of the tax police and economic departments of the Security Service of Ukraine, regardless of the creation of alternative bodies. The resignation of the management of the Ministry of Justice of Ukraine for each fact of unlawful interference with the work of various registries (movable property, real estate, proprietary rights) will be an effective WOW-solution.

Every year in Ukraine hundreds of thousands of various audits are held in corporate field. The effectiveness of these audits is disputable, which is evidences by results of such audits. At the same time, according to tax statements, almost 98% of all tax revenues are voluntary. Where there is a “hard” shadow, these audits are notconducted at al. Therefore, these audits do not impact on budget revenues or the decrease of the black economy (for example, the shady turnover of excisable goods).

In such a situation, the WOW-decision is the yearlong moratorium on any audits, except for those related to transfer pricing and excisable goods, as well as in case of accidents. One year is a sufficient term to bring regulatory bodies into compliance with standards corresponding to the idea of freedom. In this aspect, the replacement of the income tax with the Exit Capital Tax will help to simplify and improve tax administration, since it significantly reduces the number of taxable transactions, allows to automate remote control over the main part of transactions and at the same time provides taxation in accordance with the taxpayer’s will, i.e, helps to withdraw funds from business or to invest.

GDP is an objective indicator of the state of freedom.

GDP growth above the rate of inflation in Ukraine is possible providing that freedom restrictions are reduced. In addition to the aforementioned administrative restrictions, an excessive tax burden, far exceeding the Laffer curve, has a destructive impact on GDP growth.

The point of the Laffer curve is a visualization of the state of freedom in taxes. High taxes are perceived as a restriction of freedom and on the one hand suppress the energy of creation (moving forward), and on the other – lead to an increase of the tax evasion. Considering the instinctiveness of freedom, evasion of the high-rates taxes is psychologically perceived not as a matter of economy, but as a question of the “struggle” for freedom. Therefore, the result of high taxes is always the same – the decline in budget revenues and the freeze of GDP growth. Reducing the tax burden, primarily direct labour taxes (unified social tax), is a WOW-solution aimed at increasing GDP.

Conglomeration is the main obstacle hindering GDP growth. If Ukraine desires to achieve annual GDP growth of + 10% in three years, this endeavor should become a national program (strategy). Each decision and action of the state authorities should be initially tested for compliance with the principle – “Will it lead to + 10% of GDP?”. Accordingly, modification of the wage and pension system of state employees and officials can be attributed to the WOW-solution so that its main part is tied to GDP growth above 5% per year, so that they understand that by releasing a new Soviet regulation or hindering the abolition of the effective one, they lose a significant part of the reward.

Freedom and personal responsibility should become a guideline for all state activities – a universal guillotine for the entire state apparatus and legislative Conglomeration.

Kind regards,

© WTS Consulting LLC, 2019

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