The newly-installed government of Viktor Yanukovich has pledged to reinvigorate the Ukrainian economy by cutting business taxes and restoring special regional economic zones.
In a statement published on the website of the victorious Party of Regions, Mykola Azarov, who has been named as first deputy prime minster, revealed that the government will start to lay the groundwork for tax reform in 2007.
"I think 2008 will be the year for a real tax reduction," said Azarov.
"These reforms will take three to four years. After this, the economy and business can expect a period of tax stability," he added.
Azarov confirmed plans to cut the tax on corporate profits to 20% from 25% and the value-added tax to 18% from 20%. The new government will also restore at least three special economic zones to lure back foreign investors. These zones, within which businesses received various tax incentives, were abolished under the former government of Viktor Yushenko, who argued that they allowed oligarchs to siphon money out of the state.
Azarov revealed that the government will explore how it could compensate investors who suffered unexpected losses when the zones were canceled.
"We will create the best possible conditions for investment and business," Azarov stated.
"We plan to achieve annual growth in gross domestic product of at least 10% to 15%," he added.
GDP growth improved to about 6% in the first half of 2006 after dipping to 3% in 2004 as a result of plunging world steel prices.
The new government also plans to reverse decisions by the previous government to cut import tariffs. In particular, Azarov revealed that they would reconsider the low import customs on light industrial products and textiles.
Azarov also said that the government is seeking to devalue Ukraine's currency, the hyrvna, which is currently pegged to the US dollar at a rate of 5 to 1, in a bid to reinvigorate the country's exporting industry, upon which the economy is heavily reliant.
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