‘Our Ukrainian IT industry needs to be divided. There are outsourcing and product companies. An outsourcing company is when we sell grain,’ Borodatiuk says, drawing an analogy with the agricultural sector, ’That is, we sell grain to Germany, they bake bread there, sell it, and the added value remains in Germany, not in Ukraine.
Food companies harvest grain and bake bread - the added value remains in Ukraine. So now only food companies are developing, because foreign clients are avoiding contracts with Ukraine because of the risks of war. They see three risks: blackouts, missiles, and, conditionally, mobilisation. There are some companies where if one person is mobilised, the business basically ends. This is the specificity of IT.
‘Speaking globally, only product companies are developing rapidly now, thanks in part to the creation of Diia.City. For example, MacPaw or our group of companies work a lot for export, meaning that income from Ukraine is a minority in the rhubarb. As for outsourcing, even the fact that they are just standing still is already positive, because many of them are just closing down. I talked to some IT clusters and realised that last year alone, about 150 small outsourcing companies closed down,' said Artem Borodatyuk.
He also noted that almost all product companies are residents of Diia.City, a kind of ‘reserve for companies’ with a special tax regime for the IT sector.
According to Artem Borodatyuk, tax minimisation is necessary for all types of business, which will give a boost to development. According to him, a lower tax does not equal less money collected.
‘I think we need to join the European Union. But we should also understand that the European Union is already a museum where everything is beautiful and cool, but unfortunately, it is stagnating. We need the Arab-Asian model, where taxes are low, where you can buy an apartment for crypto, and where liberalisation is as high as possible. And Miltech is a great example, where I believe liberalisation and deregulation have become a key factor.
Low taxes are our way to development. Without it, we will lose the battle with the world. Arab and Asian countries have realised this. Europe is being very stupid, they are being very stupid in general, which is evident in the way they regulate artificial intelligence. We need to go there, but for geographical, civilisational, and democratic reasons, not economic ones,’ the entrepreneur believes.
As proof of this, he cited two examples, one from Bulgaria and the other from his own company.
‘In 2008, Bulgaria reduced taxes - 10% on individuals and 10% on profits remained. In one year, they collected less money, but in 10 years, they doubled the collection.
Our ‘communist wing’ of managers in the country's administration, who are responsible for the tax history and constantly want to raise taxes, think that everything will remain, we will raise taxes and there will be more money. In fact, it works differently.
Another case is my company. When the tax was increased from 6.5% to 10% in total - Diia City had 5% of salary and 1.5% of military duty, they made it 5% and 5%. We had a call with the CEO, we have 25 companies of different sizes. Last year, we grew our revenue by 70% in dollars, and before that - by 45%. And we reinvest a lot. Here, the tax rate is being raised from 6.5% to 10%, and five CEOs, i.e. five companies, have considered cancelling some of their investment projects (some have done so) because we are reinvesting all the money in ourselves - launching a new department or entering a market. Five companies are already running out of money. Here's a concrete example, when we were already paying more and more taxes for two years because we were developing. And now we won't be able to develop like that, and therefore pay more taxes,' said Artem Borodatyuk.
Business improvement initiatives
- Exit Capital Tax (ECT).
Not for everyone, but for the possibility to exist.
‘It seems that the previous administration of the country (I don't use the word ‘government’, by the way, everyone should do this. In order not to criticise the government every year, you can stop treating it as the government. This is the country's administration. We hired them, they work as managers). So, the previous administration wanted to introduce a tax on the withdrawn capital and did not do so,' Borodatyuk said.
- Implementation of British law for justice.
- Sale of unprofitable state-owned enterprises for $1 to private investors with obligations for their performance
- Simplification of migration policy.
‘If any foreign national wants to live in Ukraine, we should do everything we can to make them live here,’ the entrepreneur believes, ’because it is easier for us to get legalised there than for them in Ukraine. And now, for obvious reasons, there are not so many people willing to move to Ukraine.’
He stressed that Ukraine (not during the war) has generally good conditions - great service, great people, and it's relatively easy to do business if you pay all the taxes.
‘How much does a square metre cost in a good residential complex here? And that's it, if you compare it to Europe, then Europe should all move to Ukraine. That's why we need to make it easy for people to migrate after the war,' Borodatyuk says.
- Paying higher education institutions not for what they teach, but for the fact that a person who has studied has found a job.
- Introduction of state payments for successful completion of online courses, such as Prometheus, Coursera, so that people simply study.
- Decriminalisation of pornography.
- Regulation of cryptocurrency and blockchain business, as the Baltics have done - our entire crypto business has gone to the Baltics.
- Digitalisation of the issuance of all licences and permits.
- An entrepreneurship course in grades 8-11.
‘This is a small set of relatively simple ideas that can be done to lay the foundation. But globally, this is a course on liberalisation. Javier Millais is doing a great job in Argentina. If he continues to show the same performance, there will be no constant battle between the ideas of socialism, which we have already lived in, and full liberalism,' Artem Borodatyuk summed up.