Reanimation package of reforms > News > Columns > Corruption with the Digitization Dressing: What Does the 2047-1 Draft Law Have in Store for Us?

Corruption with the Digitization Dressing: What Does the 2047-1 Draft Law Have in Store for Us?

There are two similar draft laws registered in the Verkhovna Rada – No. 2047 and No. 2047-1. However, the second one leaves real estate appraisal intermediaries in place. Is this good or not?

Registered in the Verkhovna Rada of Ukraine, Draft Law No. 2047 “On Amendments to the Tax Code of Ukraine on Elimination of the Corruption Scheme in the Field of Registration of Information on Real Estate Appraisal Reports” can finally deal with the situation with the real estate appraisal by removing a number of questionable intermediaries charging considerable amounts of money from Ukrainians.

Currently, citizens of Ukraine pay UAH 1,800 to four private electronic platforms for registering information on the appraisal report in the Unified State Database of the State Property Fund. Until July 18, 2018, such registration used to be free of charge, and since that date, Ukrainians have paid about UAH 1 billion for the “services” of these platforms.

Their only function is the transfer of information from the appraisers to the state database and return of the results of the information processing by a state automatic module to appraisers.

These services do not require intermediaries at all, and the money for the use of the state database and the state electronic module should be sent to the state budget, according to the experts and representatives of professional associations.

The Draft Law No. 2047 establishes a fixed fee for the registration of real estate appraisal report in the amount of 20 UAH, which will go to the state budget rather than into someone’s pocket.

At the same time, the Verkhovna Rada registered an alternative draft law No. 2047-1 “On Amendments to the Tax Code of Ukraine on Elimination of Corruption Schemes in Real Estate Appraisal by Digitizing the Calculation of the Real Estate Tax Value”, which leaves these electronic platforms in place. And they are actually turned into monopolists: a new intermediary will need to obtain authorization from them.

This draft law also introduces legal nonsense such as “tax value”, which does not exist in any country in the world. With the introduction of the agricultural land market, e-platforms will also be able to appraise its value. But draft law No. 2047-1 does not stipulate any appeal against this appraisal, which is contrary to international practice.

Moreover, use of an appraisal module for each platform individually might result in different approaches to appraisal. This can become the basis for manipulation and abuse. According to the former State Commissioner of Anti-Monopoly Committee of Ukraine Ahiia Zahrebelska, during the investigation of the activities of the platforms, it was possible to stop all the processes of buying and selling real estate through “blackmail”. That is, four private companies are able to “shut down” the entire real estate market.

Ahiia Zahrebelska

In support of the draft law No. 2047-1, an awareness raising campaign was launched in the media to mislead MPs. The authors manipulate the word “digitization” in the title of the draft law to present the document as innovative. In fact, this “digitization” is only manifested in the elimination of the possibility of clarifying the real estate parameters.

The authors of the draft law believe that the platforms will independently appraise the property. But this is another manipulation, since it is impossible to determine the value of real estate without seeing it, especially if it concerns non-standard real estate

The purpose of the draft law No. 2047 is to eliminate corruption schemes with four intermediaries in the real estate sale or transfer by gift. Ukrainians will pay much less money for these agreements; the money will go directly to the state budget rather than into someone’s pocket. Whereas the alternative draft law No. 2047-1 with the “digitization” dressing offers not only to leave dubious transactions in place through electronic platforms, but also to “enshrine” their positions as redundant intermediaries.

Denys Davydenko for