Constitutional Court to rule on rights of foreign investors (07/05/98)

Constitutional Court to rule on rights of foreign investors

Eastern Economist

KYIV - Ukraine's Constitutional Court took up the issue of tax privileges for foreign investors on June 23. The court is hearing the case after 80 national deputies, the Cabinet of Ministers and a number of enterprises joined in demanding a clarification of state guarantees allowed foreign investors under Ukrainian law.

The petitioners - including such firms as Mazda Motors Ukraine and the JV Pravex-Brok - request an interpretation of Article 58 of the Constitution; Article 7 of the law on enterprise profit tax; Articles 7,8 and 31 of the Cabinet decree on the regime of foreign investment; and Articles 8 and 9 of the law on foreign investments.

Judge Mykola Selivon contended during the session that Ukrainian laws governing investments contradict each other. The September 10, 1991, law on protection of foreign investments in Ukraine granted some guarantees to foreign investors, including the right to reinvest and transfer income abroad in both domestic and foreign currencies. The law on foreign investments of March 13,1992, also stipulates a number of tax privileges, including exemption from income tax payments over the first five years of operation.

Yet, these privileges exist alongside the law on regime of foreign investing of March 19, 1996, which requires enterprises with foreign capital to pay taxes according to Ukrainian law.

A letter sent by President Kuchma to the court, and read by Judge Selivon, contends that abolishing tax benefits granted in 1991 and 1992 violates state guarantees as it creates unequal conditions for domestic and foreign investors. Furthermore, the letter noted, this hinders the creation of a favorable investment climate, effectively redirecting investment away from Ukraine to countries with stable, consistent investment laws.