Parliament supports reboot of business inspection system in first reading

The Verkhovna Rada of Ukraine supported in the first reading a Government draft law that reboots the system of business inspections. MPs voted for the draft law “On the basic principles of state supervision (control)” (No. 5837) at a meeting on 8 October.

The document aims to create a favourable environment for doing business and developing small and medium-sized enterprises. Large-scale deregulation is part of one of the four strategic goals of the SME Strategy adopted by the Government – to restore and facilitate business. The deregulatory approach of the Strategy is in line with the EU’s goal of simplifying the regulatory environment and will help SMEs to operate and grow more efficiently within the single market, the principle of prioritising the needs of SMEs (“Think small first”), and the analysis of the impact of regulation on their activities.

“Deregulation and changing approaches to state supervision are an important part of the SME Support Strategy. We aim to reboot the inspection system and reorient the current punitive and repressive approach to supervision and control to a preventive and risk-oriented one. One of the key goals is to introduce a balanced, transparent system that would guarantee the continued formation of a favourable business climate and environment for business development. At the same time, it would protect the interests of the state and people,” said Oleksii Sobolev, First Deputy Minister of Economy.

What does the draft law provide for?

• Voluntary civil liability insurance for entrepreneurs. The number of scheduled inspections will be reduced for insured entrepreneurs with medium and low risk;
• Audit of entrepreneurs’ activities as a preventive measure. Entrepreneurs will be able to engage specialists from a supervisory authority or an independent organisation to conduct such an audit. The identified violations can be corrected, and no penalties will be applied to the business. A positive audit conclusion will reduce the number of scheduled inspections by one and a half times: the period between inspections will increase from 1 to 1.5 years for a high risk, from 3 to 4.5 years for an average risk, and from 5 to 7.5 years for a low risk.
• Establishment of the institution of public councils on state control with the participation of business representatives in the controlling bodies. Involvement of the public in reviewing complaints of entrepreneurs will increase the objectivity and publicity of such review, reduce the burden on the courts by pre-trial review of complaints.
• Expansion and improvement of the Inspection Portal’s functionality. For example, control measures and document exchange will be carried out electronically. An e-cabinet for entrepreneurs is being introduced with the possibility of filing a complaint and refusing a comprehensive inspection through the e-system, etc. Automation of processes will save time and resources for entrepreneurs and government agencies.
• Introduction of the responsibility of the head of the control body for non-compliance with procedural requirements by subordinates and disciplinary liability of officials of the control body if the court confirms the illegality of the decision of the control body.

At the same time, the document strengthens the protection of citizens’ rights and encourages businesses to be responsible by eliminating unfair schemes to avoid legitimate inspections.

The document was developed in cooperation with public authorities and NGOs, and takes into account the opinions of business associations and industry unions. The amendments were recommended at a meeting of the Interagency Working Group on Deregulation co-chaired by Yuliia Svyrydenko, First Deputy Prime Minister and Minister of Economy of Ukraine.

Background

The Government approved the deregulation action plan in September 2024. The plan was approved for the implementation of the “Improvement of the Regulatory Environment” reform under the Ukraine Facility, as well as plans to implement the European Commission’s recommendations on the 2023 EU Enlargement Package and the Government’s priority actions for 2024. In total, the plan includes about 100 tasks and 140 step-by-step measures aimed at simplifying the business environment.

The Interagency Working Group on the Accelerated Review of Instruments of State Regulation of Economic Activity was established by a Government decision on 13 January 2023. The working group includes representatives of the Ministries of Economy, Digital Transformation, Environmental Protection and Natural Resources, Justice, Finance, and the regulatory service. Experts from the Better Regulation Delivery Office, the Centre for Economic Recovery, the Centre for Economic Strategy, EasyBusiness, the USAID Competitive Economy Program in Ukraine, and the USAID / UK aid Transparency and Accountability in Public Administration and Services (TAPAS) Activity are also involved in the work of the IWG.

During its work, the IWG has reviewed a total of 1,323 regulatory instruments for business. Of these, 456 were recommended for cancellation and 584 for simplification. So far, 119 instruments have been cancelled.