The Cost of Solutions: Why One-Time Government Payments for Generators Won’t Do Much to Help Small Businesses
29 January 18:58
РОЗБІР ВІД 
Faced with an energy crisis, the Ukrainian government has decided to assist small businesses with a modest one-time financial aid package, while at the same time moving forward with plans to impose an additional 20% VAT on those same businesses. "Komersant Ukrainian" investigated how entrepreneurs themselves are reacting to this.
Recently, a photo of a restaurant receipt appeared on social media, in which the customer was asked to pay separately for the use of a generator. This innovation quickly sparked online discussions about how acceptable and legal it is. Its continuation is not the subject of this article. Therefore, we can afford to accept this “service for generator operation” as a given and a current Ukrainian reality. Moreover, it is very expensive for entrepreneurs.
Some of my colleagues have already calculated that 7-10 kW gasoline generators, which are often used by small shops and coffee shops, guarantee additional daily expenses of nearly 700 UAH when running for 8 hours without power—and that’s just for gasoline. That adds up to well over 20,000 UAH a month. We don’t know if the government has done similar calculations, but the compensation figures they came up with are significantly lower.
Funds for Businesses
Small and medium-sized businesses, which continue to operate despite emergency power outages caused by Russian shelling and incur additional costs as a result, have been promised support by government officials in the form of a whole package… consisting of two measures.
First, a one-time financial payment has been promised as assistance. Sole proprietors in groups 2–3 who operate in socially essential sectors—such as restaurants, pharmacies, coffee shops, grocery stores, bakeries, and other establishments providing essential services—are eligible for this payment. They will be able to receive a one-time payment ranging from 7,500 to 15,000 UAH, depending on the number of employees and provided they have at least one employee. Applications can be submitted through the Diya portal. The funds can be used to purchase and repair energy equipment, buy fuel for generators, and pay for electricity services.
“This assistance is not intended as full compensation for energy equipment costs. It is a rapid anti-crisis tool that allows microbusinesses to partially cover energy resilience-related expenses and continue operations during power outages. For systemic solutions, the state is simultaneously offering other investment tools,” added Oleksandr Tsybort, Deputy Minister of Economy, Environment, and Agriculture of Ukraine, in a comment on the government’s initiative.
Presumably, the “additional instruments” referred to another government proposal within the “energy package.” Businesses that meet the criteria of the 5-7-9% program are offered a zero-interest targeted loan to purchase generators and batteries. The maximum loan amount is up to 10 million hryvnias.
The Ministry of Economy also explained that the one-time aid and the “5-7-9%” program do not compete with each other but complement one another, allowing businesses to develop comprehensive solutions for energy modernization.
The Alliance of Regional Small Business Associations views positively the very fact that the government recognizes the challenges faced by small businesses amid the energy crisis and is attempting to address them. However, they note that the effectiveness of the proposed solutions is, unfortunately, extremely limited. Tetyana Slaschuk, an entrepreneur from Khmelnytskyi and a representative of the “ROMB” Alliance, explains.
“A one-time financial aid payment of 7,500–15,000 UAH for sole proprietors in Groups 2–3, even in socially important sectors, does not cover the actual costs businesses face in ensuring energy independence. At current prices, these funds do not cover the cost of a generator, nor the expenses for its maintenance, fuel, or the stable operation of the equipment. In fact, this is not about support, but a symbolic gesture. More like a PR stunt. Regarding interest-free loans for generators and batteries under the 5-7-9 program, it should be noted that the market has long offered businesses similar tools—installment plans, leasing, and commercial loans. “For a significant portion of small businesses, the key problem remains not the interest rate, but the general instability, falling revenues, and the inability to forecast operations even a few months ahead,” the entrepreneur emphasizes.
Bogdan Mosunov, head of the Sumy Business Association “4Business” and a member of the Coordination Council of the National Platform for Small and Medium-Sized Businesses, notes that any assistance is welcome. At the same time, he believes that a one-time payment of 7,500 or 15,000 hryvnias won’t make much of a difference, and cites the example of a local program.
“In the Sumy region, such programs are implemented at the local level. For example, under the relevant regional program, compensation for electricity costs of up to 200,000 hryvnias is provided. People submit a set of documents and are reimbursed 50% of the cost of either solar panels, generators, or storage units. This is more helpful, I think, than receiving a one-time payment of 7,500 or 15,000,” notes Bohdan Mosunov.
He also spoke about the programs that help local entrepreneurs operate under current conditions.
“We’re a frontline community. There are four support programs in place. These involve internal relocations. For example, if a production or office facility in one location was hit and the business needs to move literally across the street, compensation is provided for relocating the business. There’s the previously mentioned compensation for purchasing generators, solar panels, and so on. Compensation for loans is also provided—this is in high demand. And there is another program that has been in place since the very first day of the full-scale invasion—compensation for damaged property. The amount is small, up to 100,000 UAH, but it is still important assistance,” emphasizes the head of the Sumy Business Association “4Business.”
Danylo Getmantsev, chairman of the parliamentary finance committee, also recently reminded officials that taxpayers are exempt from liability if they are unable to fulfill their tax obligations regarding the submission of tax returns, registration of tax and excise invoices, etc., particularly due to power outages.
“I ask the Ministry of Finance and the State Tax Service to urgently correct what I am convinced are unintentional distortions in law enforcement, where you require taxpayers to gather every piece of paper under the sun to confirm force majeure. I am convinced that an official notification of the power outage via the official channels of power-generating companies is sufficient and necessary proof,” the deputy emphasized.
The Alliance of Regional Small Business Associations agrees on the importance of waiving penalties for late filing of reports, as this issue is directly linked to the lack of electricity and internet access. If the state truly wants to support small businesses amid the energy crisis, then, as entrepreneur Tetiana Slaschuk emphasizes, systemic solutions should be a top priority:
- real simplification of administration, not its complication; a predictable tax policy without constant “surprises”;
- removing administrative pressure, which only crushes entrepreneurs in crisis conditions.
Funds from business
Speaking of constant “surprises” from officials, Tetyana Slaschuk, an entrepreneur from Khmelnytskyi, was likely referring to the “surprise” of imposing value-added tax on many sole proprietors. The government has not yet abandoned these plans, as VAT for sole proprietors is one of the mandatory conditions for approving Ukraine’s new cooperation program with the IMF. The discussion, however, centers largely on what income level should be considered the basis for registering an entrepreneur as a VAT payer. There is a view that the annual income threshold for tax collection of 1 million hryvnias is too low and could be raised to 2–3 million hryvnias.
Entrepreneurs, however, have not changed their stance on the initiative to expand the circle of VAT payers to include sole proprietors. For example, the Alliance of Regional Small Business Associations considers this idea extremely dangerous for small businesses, especially under the current conditions of war and energy instability. Lesya Zolotaryova, an entrepreneur from Myrhorod representing the “ROMB” Alliance, continues.
“Unfortunately, our association has not been fully involved in the discussion of these plans. Raising the turnover threshold to 2–3 million UAH—that is, the debate specifically over the figure—does not solve the problem at its core, since the VAT mechanism itself is excessively complex and costly for micro- and small businesses. Small businesses today do not need handouts or new obligations, but a simple and understandable approach: the opportunity to work, survive, and preserve jobs. Everything else is secondary,” the entrepreneur emphasizes.
Bogdan Mosunov, who heads the Sumy Business Association “4Business” and is a member of the Coordinating Council of the National Platform for Small and Medium-Sized Businesses, explains that he and his colleagues are participating in discussions about potential tax reforms, communicating with lawmakers and tax officials, and attending forums and roundtables. And the entrepreneur gets the impression that there is some kind of political struggle going on here, directed against the simplified taxation system, which they constantly want to destroy.
“It would be better not to implement such measures at all, as is being proposed with this VAT for sole proprietors, and then entrepreneurs wouldn’t need any compensation. Ukraine has a simplified tax system, and there’s no need to change it. There shouldn’t be any VAT here at all—not for the first, second, or third groups of sole proprietors. If, upon registering as a VAT payer, an entrepreneur enters the tax administration system, it will be very expensive. For microbusinesses, this is equivalent to closing down. They become uncompetitive, their products become more expensive, and simply no one will buy them. And for small businesses that try to continue operating, this guarantees staff reductions. “Plus, local budgets will lose revenue, because if an entrepreneur currently pays a single tax and then switches to the general system, all VAT goes to the state budget, and the local budget receives nothing,” notes the head of the “4Business” Business Association.
Business representatives never tire of emphasizing: the simplified system should not be dismantled; instead, the administration of the general taxation system—including VAT—should be made simpler.
Author: Serhiy Vasylevych
