Ukraine To Face Its 'Graft Culture' Under Aid Plan

KIEV, Ukraine (AP) A hairstyling business closes four salons rather than deal with crooked officials. An independent salesman hustling paint from the trunk of his car faces a $5 million tax penalty. A humble crafts stall gives up after taxes increase ten-fold overnight.

That's the world of small business in Ukraine a tangled thicket of bribe-hungry government inspectors and complicated, unpredictable regulations.

Reducing graft and red tape are set to be part of the conditions Ukraine will face in exchange for an international financial rescue package. Officials in Kiev are expected to wrap up talks with the International Monetary Fund as soon as Tuesday.

Yet it will take some doing. Ukraine's culture of corruption and bureaucracy is deeply entrenched.

Take the story of Aleksey Antonyuk, who runs a hairstyling, marketing and publishing company in Kiev.

He was part of the first wave of Ukrainian entrepreneurs in the waning days of the Soviet Union, setting up a hair salon with one stylist. He expanded that to a company that employed 200 people at its peak. He branched out into media, publishing a stack of glossy magazine on hair and makeup, and offered marketing services, training courses and hairstyling competitions.

The trouble began when his business grew large enough to register as a limited liability corporation. That means he needed to install cash registers and with those came government inspectors eager to find evidence of rule-breaking.

"It's like honey for flies," said Antonyuk, a tall, slim 48-year-old, in an interview at his offices in a nondescript Soviet-era building away from the bustle of Kiev's city center.

The inspectors found something wrong at every turn a register a few coins short, the safe in the wrong place. It was either a large fine or bribe to ensure a smaller one. The going bribe rate is the equivalent of $100 for small, recurring matters, and $2,000 for yearly inspections.

Meanwhile, competitors had a simpler model: renting salon chairs to independent stylists, who didn't declare any income at all.

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Ukraine To Face Its 'Graft Culture' Under Aid Plan

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