Important Draft Laws. Issue 5: Attack on the Ukrainian Language, Expansion of NACP Powers, Support for Veteran Businesses, and Student Self-Government

Over the two weeks, 75 bills and resolutions were registered in Parliament. Of these, 28 were initiated by people’s deputies and seven by the government. We have selected the most important ones for you.

Some registered bills have already caused a particular resonance in expert circles and the media, notably the government’s draft law on national minority languages, which implements the recommendations of the Venice Commission and the EU. This bill carries the risk of further spread of the language of the aggressor country on the territory of Ukraine. Another bill that has garnered significant attention proposes to expand the powers of the National Agency on Corruption Prevention (NACP) to include property checks of declarants and their families before assuming office.

Other essential bills registered during this time about the following spheres: support of veteran entrepreneurship, the introduction of accountability for public officials for disseminating unreliable information about the use of public funds, the establishment of a Registry of Victims of Russian Aggression, and the strengthening of student self-government. Additionally, MPs have registered another bill, developed in collaboration with the Ministry of Digital Transformation, concerning the taxation of cryptocurrency transactions. 

Implementation of European norms regarding languages of national minorities or an attack on the Ukrainian language?

Bill No. 10288 proposes amendments to a range of legislative acts (including the recently amended law on national minorities) to expand the rights of national minorities. The draft project suggests changes to laws related to education, local self-government, publishing, and media.

Specifically, it guarantees the right of individuals belonging to national minorities to receive basic and specialized secondary education (excluding courses related to the study of the Ukrainian language, literature, and history) in the language of the national minority, which is an official language of the European Union. Higher education institutions will also be able to provide education in one of the official languages of the EU while teaching Ukrainian as a separate subject. 

Furthermore, the bill specifies the definition of populated areas where representatives of national minorities traditionally reside (they are required to have lived there for at least 100 years unless they were deported or compelled to flee due to war or occupation) or where they constitute a significant percentage (not less than 15% according to official statistics). In such populated areas, pre-election campaigning is allowed in the language of the minority (without duplication), and advertisements are allowed with translation into Ukrainian.

Potentially, the most dangerous aspects for the Ukrainian language could be the bill’s provisions concerning the creation of separate bookstores for national minorities, where at least 50% of the assortment must be in the language of the minority as well as the permission granted to TV and radio companies broadcasting in the languages of national minorities to reduce the share of Ukrainian language content to 30% of airtime (regardless of whether they are regional or national channels) compared to 80-90% for other broadcasters. While the latter provision will only come into effect five years after the termination of martial law, it may contribute to the renewed marginalization of the Ukrainian language from our television and radio broadcasts (as one should not assume that Russia will abandon attempts to undermine Ukrainian identity, even if it does so without overt aggression).

Therefore, it is worth conducting a thorough public discussion on how exactly the bill will work and conveying the position of Ukrainian society to the relevant European institutions. 

Expanding the powers of the National Agency for Corruption Prevention (NACP) during the verification of declarants

On November 14, 2023, the Cabinet of Ministers of Ukraine initiated Bill No. 10262, and by November 22, people’s deputies adopted it on first reading. This initiative aims to expand the powers of the National Agency for Corruption Prevention (NACP) and introduce new mechanisms for verifying the assets of declarants. This bill aligns with the recommendations of the European Commission regarding developing anti-corruption policies in Ukraine.

The bill proposes to allow NACP to conduct a complete re-examination of movable and immovable property acquired by declarants and their families before their appointment or election to office if the agency receives new information about an object it has already examined or if there are new sources of information that were not known or accessible to NACP during the previous comprehensive review. 

While expanding NACP’s powers can be seen as positive, the bill has a significant drawback, i.e., the absence of clear criteria for defining “new sources of information.” This shortcoming could potentially open the door to abuse and have severe consequences for declarants. Therefore, this provision needs to be further refined.

Taxation of virtual assets

On November 17, a bill concerning the taxation of virtual assets was introduced in Parliament as an alternative to bill No. 10255, which was mentioned in the previous issue. The alternative proposal differs from the main bill in several ways, including adding the Ministry of Digital Transformation to the list of virtual asset market regulators, alongside the National Securities and Stock Market Commission and the National Bank of Ukraine, which are already included in the main bill.

Additionally, the bill proposes the creation of a State Register of service providers related to the circulation of virtual assets and publicly offered virtual assets. It also defines a phased increase in tax rates for individuals conducting operations with virtual assets: 5% for the first three years after the law is passed, 9% for the following five years, and 18% after that. As in the main bill, service providers dealing with virtual assets will be subject to an 18% PIT rate but will be exempt from VAT, except for consultancy services. Legal entities will pay an 18% corporate income tax rate. Since the current Tax Code and the Law on Stimulating the Development of the Digital Economy in Ukraine allow Diia City residents to choose how to pay corporate tax – either 9% on withdrawn capital or 18% on income on general terms – this legislative initiative will provide them with an additional level of flexibility. However, how much net revenue this tax introduction will bring to the budget currently needs to be determined. 

Creation of a registry for individuals affected by Russian aggression

The government-initiated Bill No. 10256 proposes the creation of a state register of individuals affected by Russia’s armed aggression against Ukraine. This register will not only document the harm inflicted on lives and health, including psychological trauma and sexual violence but also facilitate data exchange between state information systems and the tracking of budget expenditures related to assistance for the affected individuals.

The bill allows those whose lives and health have been affected by the aggression to receive compensation. Among these individuals are the victims themselves, their children, children born as a result of sexual violence, as well as family members or heirs of those who have died. The bill allows filing lawsuits with judicial authorities, seeking compensation through international compensation mechanisms, or delegating these powers to the state. As “emergency relief” and to prevent irreparable harm, affected individuals will be able to receive immediate interim reparations from the state. 

Individuals subject to sanctions, including those with prior service in the Russian military or law enforcement and those who are permanent residents of Russia or Belarus, will be ineligible for compensation under this bill.

Additionally, the bill proposes to include in the current State Register of property damaged due hostilities the harm inflicted on non-property rights since February 19, 2014. 

Veteran entrepreneurship and employment

Bill No. 10258, titled “On Veteran Entrepreneurship,” initiated by 40 MPs, proposes to provide various forms of state support to veterans’ enterprises (those included in the Unified State Register of Veterans’ Enterprises). This support includes grants, loans, subsidized loans, the provision of state guarantees, and assistance in implementing energy-efficient and environmentally friendly technologies.

Legal entities will be eligible for the status of a veteran entrepreneurship entity if at least 60% of their management consists of veterans. 

Another bill (No. 10261) is also aimed at the reintegration of veterans. According to it, companies, institutions, organizations, and individual entrepreneurs employing hired labor must hire war veterans – at least 2% of the average staff size per year. Companies that do not meet this requirement will be subject to a fine equal to the annual average wage at the respective company for each job within the quota that a veteran does not fill. A similar provision exists at a 4% level for persons with disabilities. However, this quota is only sometimes met, as some companies may prefer to pay the fine rather than create the required job positions.

Strengthening student self-governance

Bill No. 10279, developed by the Committee on Education and Science and supported by the Expert Council of Student Self-Government, proposes changes to the Law on Higher Education. It suggests altering the quotas for forming academic councils of higher education institutions (HEIs). Specifically, it includes doctoral students in the quota for academic and research staff, which stands at 75% (under the current norm, elected representatives of postgraduate students are included in the quota for other staff, which is 15%). Additionally, the bill increases the quotas for student representatives from 10% to 15%. This change will make it possible to consider the interests of different groups of higher education seekers and diversify representation in HEI governance bodies.

The bill expands the autonomy of student self-government and grants it real influence over HEI activities. It organizes student self-government into representative, executive, electoral, and control branches and proposes giving student self-government bodies the right to make suggestions regarding educational programs. This strengthens their role in shaping education content and may align programs with the current needs of the job market. The bill also includes a slight increase in the budget for student self-government (from 0.5% to 0.6% of the institution’s own income received from its main activities). It introduces permission to receive funds from other sources not prohibited by law. 

Additionally, the bill standardizes the procedures for using property and funds by student self-government bodies and defines the interaction with the administration of HEIs. Specifically, it establishes that decisions made by student self-government bodies within their competence do not require approval, endorsement, or enforcement by the institution’s leadership, public self-government bodies, and/or other governing bodies of the HEI. This strengthening of powers will promote greater student involvement in self-governance.

Another innovation is the possibility of creating individual study plans and expanding the reasons for taking breaks in studies (so-called “academic leaves”). In addition to reasons such as health and mobilization, the bill proposes to include participation in academic mobility (study or internship abroad) and a break “at will” as valid grounds. This will provide students with more flexibility and control over their education. 

Increasing accountability for public funds usage

Under the current Law on Transparency of Public Funds Usage, public authorities are required to disclose the following information:

• Information regarding the use of budgetary funds:
  • General amounts of budget allocations and/or appropriations for the respective period.
  • Amounts of expenditures made and credits granted from the budget during the reporting period.
  • Details of concluded contracts, including cost, contractors, payment amounts, terms, and other parameters.
  • Information on the status of previous contracts.
  • The number and amount of expenses related to official business trips.
• Information regarding the use of enterprise funds:
  • The volume of payments under contracts during the reporting period.
  • Details of contracts with a value exceeding UAH 1 million.
  • Information on the status of contract execution.
• Information regarding the use of social insurance and Pension Fund funds:
  • Receipt and expenditure volumes approved for the year.
  • Information about concluded contracts and their execution.
  • The number and amount of expenses related to official business trips, including those abroad.

The information must be published on a single web portal dedicated to the use of public funds, organized into separate sections for various sources of financing. This information should be available for free public access for a period of three years from the date of publication. However, if a public official from the respective authority fails to disclose this information, no consequences or penalties will be specified for them.

Therefore, the bill registered under No. 10255 proposes to introduce fines for officials who violate the requirements for disclosing information as follows:

• 25 to 50 non-taxable minimum incomes (UAH 425 to 850) for non-disclosure or untimely disclosure of information.
• 50 to 70 non-taxable minimum incomes (UAH 850 to 1190) for disclosing inaccurate, incomplete, or false information.
• 60 to 80 non-taxable minimum incomes (UAH 1020 to 1360) for the repeated commission of any of these violations within a year.

In this case, the courts will not consider administrative offenses but the State Audit Service, which will be responsible for imposing fines on violators. 

In this way, the deputies are attempting to strengthen the accountability of officials for the timely disclosure of accurate and reliable information regarding the use of public funds. 

Streamlining medical procurements

Bill No. 10282, authored by members of Parliament, proposes changes to the law “On Public Procurement,” aiming to simplify the procurement process for medical goods and pharmaceuticals.

The bill suggests that medical procurements (except those conducted by the Ministry of Health) should be carried out through electronic catalogs (currently, only “below-threshold” procurements, i.e., those below the threshold of UAH 200,000 for goods and UAH 1.5 million for works, are done through catalogs). If a procurement cannot be made through a catalog, the procuring entity can announce a tender, but the expected price must be at the level indicated in the catalog. 

The bill also allows for the use of negotiation procedures for centralized procurement, joint procurement with European Union countries, and conducting aggregated procurement (i.e., procurement for multiple customers) through centralized procurement organizations. Implementing such procedures makes sense for standard goods or works, but if a hospital needs to purchase non-standard high-tech equipment, this procedure could complicate such procurement. Therefore, in our opinion, it is worth discussing this initiative with healthcare institutions and local government representatives.

Differentiation of military tax depending on income

The bill registered under No. 10267 proposes changes to Ukraine’s Tax Code, specifically introducing differentiated military tax rates. Currently, the military tax rate is 1.5% for everyone. The bill suggests keeping this rate only for incomes up to three minimum wages (as of January 1, 2024, the minimum wage will be UAH 7,100). For higher wages, the following rates are being proposed:

Such an increase in tax rates will apply to taxpayers of all ownership forms except for state and municipal ownership. 

The bill aims to increase defense sector funding by increasing budget revenues from the military tax. However, this step could lead to concealing real incomes and transferring them into the “shadow economy.” Therefore, similar initiatives should be implemented after or simultaneously with a “reboot” of the tax administration and the Economic Security Bureau.