Экономические науки/3. Финансовые отношения

Karnabaev I.I., Moiseieva F.A.

Donetsk National University of economics and trade named after Mychaylo Tugan-Baranovskiy

State financial support of business in Ukraine

At the present stage of development of the Ukrainian economy the prerequisite for successful progression is the development of entrepreneurship in the country. In developed countries, small business is a reliable support for the real economy and, therefore, the state should help entrepreneurs grow and "stay afloat."

It should also be noted that the key element of the environment of small business is big business because big business has the potential to support small enterprises, which are implemented through a wide range of forms of economic integration.

The problems of maintenance of small and medium enterprises in Ukraine, are researched by a number of scholars such as B.Adamov, V. Amitai, A. Blagodarnyi, Z. Varnaly, Vasilenko, L. Vorotina, I. Lukin, V. Liashenko, M. Nagorskaya , Y. Novikov, V. Podsolonko, V. Sizonenko, Sobolev and others. But still some problems of state financing of small and medium businesses not fully resolved.

Currently, there are no specialized comprehensive studies on the state regulation of business in Ukraine, which take into account the existing organization of power and, therefore, practical solution for many problems associated with the development of business is complicated by the lack of theoretical development in this area.

Due to the lack of unanimity on the question of law of public financial support for entrepreneurship in Ukraine there is a legal nihilism that leads to the development of black business and increases its impact on the economy. The shadow business allows entrepreneurs to carry out highly profitable projects and benefit from a large and fast income, fully or partially tax-free. Tax evasion is reflected in the income of the state budget, and, as a result, also on public expenditures, which according to the estimate may not fully satisfy the funding of the enterprise.

Government expenditures on supporting the private sector can take many forms, but in general terms they can be defined as subsidies.

M. Kolosnitsina defines a "subsidy" as follows. Subsidy is a help from the state for private manufacturers or consumers, which is provided free of charge by other economic agents.

Basic properties of subsidy:

- royalty-free, irrevocable transfer of funds (for subventions possible refund, if the funds have gone to another target)

- targeted

- Co-financing (on terms of equity financing)

Direct subsidies are used to fund basic research and development activities the introduction of new techniques and advanced training. On the one hand, subsidies can encourage the development of promising sectors, on the other - to support unprofitable, but strategically important enterprises (with all the consequences of government intervention in the market economy). Agricultural production is subsidized through compensation.

Indirect subsidy is exercised at the expense of fiscal and monetary policy. State applies preferential taxation of corporate profits, practices the return of direct taxes and customs duties, state guarantees and deposit insurance, export credit provided to the private associations of soft loans.

It is important to emphasize that the provision of aid involves a certain change in market behavior of a recipient as a result of changes in the price or the cost of goods, services and factors of production. The purpose of the subsidy is to motivate or, conversely, to limit the growth in output, demand, supply, consumption, use of any goods, services and production factors.

State aid can take many forms:

1) direct payments (subsidies);

2) indirect subsidies in the form of:

- Reduction of tax liabilities;

- Concessional loans and state guarantees for the loans;

- The provision of goods and (or) services at low market rates;

- Procurement of goods or services at prices higher than the market ones;

- Certain regulations.

Because of the lack of funding for small and medium-sized entities state enterprises are forced to turn to commercial banks for loans. Recently, the usual mechanism of lending by banks has become almost inaccessible to most businesses as a result of a significant increase in the cost of borrowing, and because of the decline in lending by banks. Despite the fact that banking institutions today have insufficient financial resources to restore credit, they have been reluctant to do this on the scale that had been before the crisis. Primarily, due to the fact that there is still a high level of credit risk. At the same time, for example, the average market value of a bank loan for trading capital is to small and medium-sized businesses have decreased from 28.56% (first quarter of 2009) to 21.35% (fourth quarter of 2010). But it did not make this type of loan available for the majority of enterprises in Ukraine.

At this point, the problems with the public funding of business can be resolved, attracting the legislative and executive bodies’ attention, because there are many obstacles that hinder the legitimate development of small and medium-sized entities. Partial lack of financial and legislative support from the state in the development of business in Ukraine is increasingly pushing new entrepreneurs to seek illegal ways of doing business and take their business into the shadow economy, which adversely affects the economy as a whole of Ukraine.