The presentation of an alternative bill of "Diia City" was held

At the same time, despite the industry’s conceptual support of the Diia City, the registered project contains some provisions that may pose risks to the development of the information technology industry in the future. The IT community has repeatedly emphasized these critical points, such as:

• Significant increase in the regulatory burden on the industry, creation of new regulatory bodies and giving them broad powers;
• Not completely transparent and declarative procedure for acquiring the status of a member of “Diia City”, as well as its loss;
• An incomplete list of IT activities that a resident can carry out under the proposed regime;
• Restrictions on the cooperation of companies with natural persons-entrepreneurs.

To eliminate these risks, on November 18 the People’s Deputies of Ukraine headed by Kira Rudyk (leader of the Voice party) and Andriy Nikolayenko (Batkivshchyna faction, member of the Finance, Taxation and Customs Policy Committee of the Verkhovna Rada) submitted an alternative bill – 4303-2. It was supported by 16 representatives of the following political forces: the Voice party, the factions of the All-Ukrainian Union Batkivshchyna, European Solidarity, Servant of the People, and the parliamentary group Party for the Future. The bill was developed in close cooperation with the industry represented by the largest business associations in Ukraine: the European Business Association, the IT Ukraine Association, the American Chamber of Commerce in Ukraine, the Ukrainian Venture and Private Equity Association with the involvement of Sayenko Kharenko Law Firm. Among the main differences provided by the alternative bill, Kira Rudyk, People’s Deputy and the leader of the Voice party, highlighted the following:

1. Replacing the rigid role of the regulator with simple and clear rules of entry and exit from the legal regime of “Diia City”, i.e. the creation of a fully declarative principle;
2. Absence of an instrument of hidden additional taxation in the form of mandatory membership fees of residents;
3. Preservation of the existing model of interaction of the company with natural persons-entrepreneurs without any restrictions and with leveling of existing risks of retraining of such relations in labor.

Andriy Nikolayenko, a representative of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, noted that the tax amendments to the main bill, which were discussed in the committee, provide for interaction with natural persons-entrepreneurs, but with restrictions of 20% of total costs, and the share of such contracts will decrease annually. It is worth noting that during the last 2 months Andriy Nikolayenko headed the working group on the development of the provisions of the bill on taxation in the IT sector. Also, the introduction of the concept of gig-workers is a rather time-consuming process, as it is necessary to make numerous changes to the outdated Labor Code, and most importantly – it is not known how such a system will be adopted by the IT community. The best option now, along with the introduction of new “rules of the game” is to also leave the existing ones, which have been proving their effectiveness for more than 10 years, helped to bring Ukraine to the TOP of IT countries of the world. That is, it is important to follow a completely democratic and liberal path: to allow companies to really choose a system that is convenient for them (either gig-workers to be regulated by the Labor Code or free interaction with natural persons-entrepreneurs). If the new system of gig-contracts is really perfect – the market itself will adjust the necessary balance regarding the best model of cooperation for a particular business. One of the main aspects of IT development, according to business, is the lack of regulation, freedom of choice, and transparent conditions. These key points allowed to reach $4.5 billion in exports in 2019, 200,000 professionals, and stable growth of companies by 20-30% annually. This emphasizes the importance of providing existing mechanisms along with creating new ones. Therefore, the business unequivocally supports the concept of “Diia City” and thanks the team of the Ministry of Digital Transformation of Ukraine for the initiative. However, to scale this idea and make it as useful as possible for all IT, to avoid significant bureaucratic and regulatory risks, to take into account the necessary mechanisms that have already helped to develop IT and really provide a win-win platform for government and industry – an alternative project №4303- 2 still looks more consolidated and democratic. We hope that in the end, we will be able to combine our developments and efforts to achieve the goal that unites us – to create a technologically modern and powerful country that currently has impressive IT potential.