Legal regulation of state support of agribusiness

Introduction

The agro-industrial complex is characterized by seasonality of production, relatively slow capital turnover, production risks due to instability of climatic conditions, large investments, and energy intensity, and therefore, quite often needs specific state regulation and support.

The complex nature of agricultural production, a massive improvement of land and property ownership, which is currently taking place in the agro-industrial complex, requires the creation of an appropriate system of state and legal regulation of agricultural entrepreneurship, which includes general economic legislation and special regulatory provisions that form the basis of agricultural legislation.

Today, the implementation of effective administrative and legal regulation of the agro-industrial complex is impossible without real state and legal regulation and the creation of conditions conducive to economic entities in the agricultural sector. In particular, by establishing a new state and legal regime and strengthening measures to ensure food security, as well as reducing the cost of manufactured products, which is achieved, inter alia, by simplifying and reducing management and tax costs.

Development of more effective than existing forms and methods of state and legal regulation of the agro-industrial complex is possible only if: a study of the genesis of this type of regulation; analysis of the reasons for insufficient effectiveness of previously applied measures; rather-legal analysis of models of state and legal regulation of the agricultural sector in foreign countries;  study of the requirements of the international acts and treaties ratified by our state and implemented into Ukrainian legislation; clear classification and analysis of existing forms and methods of state and legal regulation of the agroindustrial complex.

Purpose and objectives of the research

The purpose of the article is to study the state and legal regulation of the agricultural sector as a complex and multifaceted process of regulating the influence of the state on the subjects of the agro-industrial complex, through legal and economic instruments of regulation that combine organizational, management, and market elements.

State and legal regulation is always aimed at streamlining the industry, and important conditions for its effectiveness are control of compliance of the achieved results with the set tasks, and also constant updating of the purposes of such regulation.

Methodology

The methodological basis of the article is modern methods of scientific knowledge, which are today used by legal science in conducting research. The authors of the article combined general scientific and special methods for the best achievement of the goal set in the article. All methods were used in combination and complementarity, which provided objectivity of conclusions.

The formal-legal method was used in the study of scientific sources, devoted to the problems of legal regulation of state support for agribusiness in various foreign countries. The authors managed to rethink the issue, raised in the article, more thoroughly thanks to the analysis of various scientific points of view, in particular on the legal regulation of state support for agribusiness.

Using the hermeneutic method, the texts of scientific works in the field of legal regulation of state support of agribusiness in Ukraine and some foreign countries are interpreted. The authors also clarified the relationship between the norms that explain the essence and certain norms concerning the legal field of state support of agribusiness.

The analytical method was used to analyze and substantiate the positions of some theories of authors, for example, on the expediency of borrowing the experience of European countries to improve Ukrainian legislation in the field of legal regulation of state support for agribusiness.

The deduction method helped to investigate the relationship between changes at the international level and their possible implementation in the legislation of Ukraine concerning the legal regulation of state support for agribusiness. This method was used mainly in combination with the comparative legal method, which allowed to identify of common and distinctive features of the legal regulation of state support for agribusiness and agricultural industry. The authors compared the legislation of different countries regarding the legal regulation of state support for agribusiness to identify the advantages, disadvantages, risks, and prospects of agribusiness development; offered favorable ways to integrate the international experience into Ukrainian practice.

Literature Review

Sources of agrarian law serve as external forms of expression and consolidation of law-making activities of the state as an important factor that influences the formation and development of legal institutions in the field of regulation agrarian legal relations.

Thus, P. Safonov (2005) analyzing the current agricultural legislation and the current state of agriculture, determines that state support as a multidimensional purposeful activity has several components: first, it is the establishment and operation of agricultural producers; secondly, the adoption of relevant laws and regulations; third, the creation of the system and definition of tasks, functions, competencies of bodies that have to perform state support for the agricultural industry.

Verzun A. (2017) notes that food security issues in different countries have both common features and significant differences, which means that they are related to the mentality of the residents, national traditions, the level of development of productive forces and production relations, and, in general, the place that the country occupies in world politics. The stability of agrarian business development at the expense of own production is of strategic importance and is the main function of state support, as it affects not only food security, but is also an important factor in the country's national security.

The scientific and theoretical basis of the article is also works of domestic scientists who considered the researched problem, such as Verzun A. (2017), Kurilo V. (2011), Melnyk A. (2014), Poznyakov S. (2017), Safonov P. (2005), Shumilo I. (2005) and others.

State support in the agricultural sector today can be implemented under the Laws of Ukraine "On state support of investment projects with significant investments in Ukraine" (Law No. 1116-IX, 2020), "On public-private partnership" (Law No. 2404-VI, 2010), "On concessions" (Law No. 155-IX, 2019) and "On production sharing agreements" (Law No. 1039-XIV, 1999), etc.

Results and Discussion

The agricultural sector of the economy is a rather complex set of relations, which must take into account natural, technological, economic, social, and other factors. One of the defining forms of state support for agribusiness is legal regulation.

Political interest is an important motivation in allocating to a complex branch of law norms that determine modern agricultural policy. Indeed, the more the state is interested in the normal development of agrarian relations, the more it will seek to regulate them by legal norms.

 Legal regulation in the agricultural sector includes focusing on: agrarian and land reform, which provides for antitrust policy; to increase the prestige of rural labor and rural livelihoods; on the transformation of structural, investment, tax policy, which ensures the priority development of the agroindustrial complex. Also the formation of market socio-economic structures that operate based on various forms of ownership and management.

The complex of land, property, labor and organizational-managerial relations in agricultural activity is regulated by the norms established as a result of the law-making activity of competent public authorities as a result of the implementation of agricultural policy. As a whole, the above-mentioned relations constitute agrarian relations, which in turn are separate types of social relations (Law  No. 254k/96-VR, 1996).

Land relations have a special place among agrarian relations, as the land is the main means of agricultural production. The norms of agrarian law determine mainly the rights and obligations of agricultural commercial organizations regarding the rational use of agricultural land.

Property relations relate to the legal regime of property of agricultural commercial and non-commercial organizations, organizational and legal form, and their contractual relations.

Labor relations arising within the enterprises of the agrarian sphere are mostly regulated by the norms of local legal acts, and they are an important part of agrarian relations.

Organizational and managerial relations governed by the rules of agrarian law are relations within agricultural formations.

Today it is difficult to imagine the development of the agricultural sector without the involvement of innovation.

The innovation process is the transformation of scientific knowledge into innovation and includes the following stages: "science - technology - production-consumption." In the agroindustrial complex, the innovation process involves a constant stream of transformation of research and development into new or improved products, materials, new technologies, new forms of organization and management, as well as their introduction into production to obtain an economic effect. Availability of natural resources, significant scientific and educational potential, the interest of agricultural producers, the possibility of attracting public-private partnership, as well as a clear legal framework and targeted support from the state are the conditions and factors that contribute to the innovative development of the agricultural industrial complex (Law No. 2404-VI, 2010).

Production and commercial activity in the field of agriculture is one of the most important subject matters to the legal regulation of the sphere of agrarian law. However, mainly issues related to the organizational forms of activity of agricultural producers themselves, processors of agricultural products, economic entities engaged in the provision of services in the field of agriculture (including logistics, marketing, and others), and the sale of agricultural products are subject to legal regulation in this production and economic activity.

Such relations depend to the greatest extent on the quality of legal regulation, since their formalization is a necessary condition for the state's influence on these entities directly, and as a consequence, on agricultural production.

Optimization of organizational and legal forms of agricultural producers is the most important and complex link in the legal regulation. All others are natural, technological, and economic factors of agribusiness, they accumulate in the activities of each enterprise in the agricultural sector, highlighting the problem areas, as well as the potential opportunities presented by its organizational and legal mechanisms.

It's plainly obvious that economic, technological, and, especially, natural factors of agricultural production need much less mediation through legal relations because each of them is under the influence of their laws. However, the specifics of the agricultural sector is its heavy reliance on natural and climatic conditions. In this regard, state influence on agricultural production becomes objectively necessary.

The extent and scope of legal regulation of such interaction are determined by the need to take into account these factors in the regulation of social relations. Thus, natural factors affect the seasonal nature of agriculture and its organization, and in the legal regulation of various meteorological, agronomic, veterinary, and other services that study and use these natural factors for their purposes, etc.  Technological processes find their legal embodiment in the form of rules, instructions for the organization of these processes, which exclude irrational approaches to agricultural production, causing material damage to agriculture, environment, harm to human health and life, and more. Economic processes need legal regulation to combine and optimize the economic interests of the state, agricultural producers, and consumers of agricultural products. All this is also taking place through a system of taxes and other payments to the state budget, which is regulated by relevant legal norms. Also, this process occurs through various forms of economic incentives and forms of interaction between participants in agricultural production, regulation of pricing policy, quotas for the purchase of grain, grants-in-aid, used in agricultural enterprises, forms of strategies and tactics of economic development, etc. (Law No. 1555-VII, 2014).

In this case, economic relations are unified (provides interaction and mutual understanding of participants in agricultural production) and mandatory, due to legal norms and it is effective and acceptable to all parties to agricultural production. According to many researchers, industrial relations are central to the subject of agrarian law, but many other relations are directly related to agriculture. But we should not limit ourselves to the production feature of these social relations. Issues related to paying state pensions or the provision of certain social benefits to agricultural workers are outside the agricultural relationship. However, those social relations that should not be excluded from the sphere of agricultural legal relations which are defined by household and other social living conditions of workers in the agricultural sector of the economy in a particularly rural area, as the entire social infrastructure of a single united territorial community is objectively subordinated to the task of agricultural production.

For the efficiency of agricultural production is important not only those social conditions for workers, which are formed directly in production, but also, first of all, the social conditions of their place of residence, which ensure the full existence and development of workers and their families (Safonov, 2005). The difference between these relations and the general state social policy and the measures taken on their basis is the local nature of their manifestation. These social relations are built into the system of agricultural relations on the territory of a separate united territorial community and are one of its necessary elements. However, the main consolidating role in this process is played by local governments. They build a specific model of these relations, which should embody the balance of social and economic interests of the people through their powers.

Characterizing the field of legal regulation of agricultural relations, along with the production and social sphere, it is necessary to mention the area related to the proper maintenance and use of the natural environment. Many scholars consider this problem to be the subject of an independent branch of environmental law. There is no doubt that the actions of local governments on such an important object of natural resources as land, have a complex nature, which is manifested, on the one hand, in the organization of land management and land use for agricultural production, on the other - in the protection of land resources as an ecological object from corrosion, pollution, and other harmful effects.

Natural resources are an important component of the technological process in agriculture, without which agricultural production is impossible (Kulinich, 2006).

It is natural resources that determine the objective opportunities for the development of a particular agricultural sector. And taking into account the properties and manifestations of these natural resources, the appropriate technological processes of production are selected. Of course, not all types of natural resources have equally integrated social relations of people. As a result, legal relations in the field of land management are regulated not only in the Land Code but also are the subject of an independent branch of land law.

The peculiarities of certain natural resources are that in addition to environmental, they may have production value. As a consequence, there is an emerging of strengthening comprehensive and systematic legal regulation and influence on these relations, which can be provided only through appropriate institutions of power, including through local governments. The balance of legal regulation of these relations is achieved through regulations of public authorities, also eliminates distortions that invariably arise in different, sometimes opposed tasks, on the one hand, conservation, on the other - in the use of natural resources.

The consolidating role of government is manifested in both legal and organizational acts – national  and regional levels (programs, concepts, plans, etc.). In this case, an attempt is made to combine technologically and economically unrelated agricultural enterprises that are scientifically substantiated by the organizational activities of the authorities (Shulsky, 2014).

Features of the legal regulation of agricultural relations are manifested in the substantive regulation of these relations. Quite often, the legislator seeks to thematically comprehensive coverage of a particular area of agricultural production, contrary to the rules of legislative technique. This approach to legal regulation is inherent to environmental relations, it is due to the necessity of comprehensive and detailed accounting of the conditions of protection and use of any other type of natural resources (Kovalchuk, 2020).

In all the diversity of legal relations in the field of agriculture and natural resources, it is important to highlight the group of public relations that is mediated by the powers of local governments. The importance of these relations is due not only, as noted above, to the consolidating role of local governments, which bring together diverse and multifaceted issues of agriculture and environmental protection, but also in the fact that partially, local governments are in a position that provides the shortest and fastest contact between the parties in the decision-making process, actions and obtaining the result (Kovalchuk, 2019а).

This is the most saturated, dynamic, and developed area of legal relations, which also covers the majority of subjects of agricultural and natural resource relations. The powers of local governments give a negative result, which confirms or denies the correctness of the chosen solution in its practical implementation.

Availability in each united territorial community regulatory entities, law enforcement entities, and entities that directly produce services and products, makes the united territorial community a kind of laboratory, where certain models of agriculture and natural resources management are validated.  Meanwhile, since Soviet times, the economy has focused on centralized agricultural management, so it takes little account of the peculiarities and specifics of agricultural production on the site. Of course, in some issues, both agriculture and natural resources require common approaches and requirements, but in a market economy is very difficult, and it is not necessary to regulate in detail the organization of agricultural production in a particular local government. In this situation, only the municipal government can objectively take into account all the nuances in the organization of agricultural production in its territory and make appropriate decisions to this situation, to balance the interests of all participants in agricultural relations and natural resource relations (Kovalchuk, 2021).

Thus, the regulation and consideration of issues of agricultural and natural resource relations in this perspective has not been properly reflected in the current legislation, nor, moreover, in the scientific and legal literature. Traditionally, since the existence of local councils of people's deputies, municipal authorities have now been given the role of auxiliary government agencies that perform certain state functions on the site.

As a rule, the current agrarian and natural resource legislation does not provide for any special functions for local governments, does not provide opportunities for independent additional regulation of their respective legal relations (Regulation (EU) no 1379/2013). Meanwhile, this hidden potential of law-making and organizational capabilities of local self-government bodies under the skillful leadership of the competent state structures could contribute to solving many problems of effective management of agriculture and natural resources. Of course, solving such problems by local governments is possible only in close coordination with government agencies, agricultural enterprises, and organizations (Kovalchuk, 2019b).

It is extremely important to provide state support for significant large-scale investment projects, which, by current Ukrainian legislation, can be provided to investors with large investments in the following ways:

1. exemption from payment of certain taxes and fees under the Tax Code of Ukraine;
2. exemption from tax on the import of new equipment (equipment) and imported parts for the implementation of investment projects under a special investment agreement under the Customs Code of Ukraine;
3. preferential use of state and public lands for large-scale investment projects - to grant the right to use (rent)   state and public lands for large investment projects. The investor has the preemptive right to own such land and real estate after the expiration of the investment and special investment agreement (except for early termination), provided that the obligations are determined taking into account the special investment agreement. The scope of the right is specified in a special investment agreement;
4. providing the infrastructure necessary for the implementation of the investment project (highways, communication lines, heating, gas, water, electricity, engineering networks, etc.) at the expense of state and local budgets and other sources that are not prohibited by law.

If a large investment project requires connection to networks such as heating, gas, water, electricity, and housing and communal services, such as networks related to the economy, government, and other property laws and/or telecommunications, the state provides funds to natural monopolies, helps investors to make significant investments in the merger process, according to the law.

The total amount of state support for the implementation of large-scale investment projects consists of the following:

1. all funds that are exempt from taxation - the amount of taxes and fees that have not been paid to the budget and remain at the disposal of the investor with large investments under the terms of an exclusive investment agreement. In the case of allocation or lease of land to implement an investment project, local self-government pays a fee for land less than the amount established for land belonging to a certain category. All features are taken into account when determining the total amount of state support for the implementation of investment projects with significant investments in a particular area;
2. the total cost of all relevant infrastructure required for the implementation of large investment projects and the construction of special investment agreements from the date of commissioning.

The total amount of state support for the implementation of large-scale investment projects is determined in a special investment agreement and should not exceed 30 percent of the planned significant investment in the main investment project. The Cabinet of Ministers of Ukraine determines the methodology for calculating the amount of state support for the implementation of large-scale investment projects. To the register of investment projects with significant investments, the procedure for which is determined by the Cabinet of Ministers of Ukraine has included information on large-scale investment projects, supported by the state under the law, including information on the investor's fulfillment of its obligations under the special investment agreement, on large investments in investment objects and large investment projects, start-up of such investment objects, as well as the amount of state support for investors with large investments under the legislation and special investment agreements. Information, which is included in the register of significant investment projects, is open to the public (except for information with limited access). The competent authority, central executive body, which implements the state tax policy, and the central customs authority of the executive power, can automatically exchange information, which is included in the register of investment projects, with large investments to the extent and according to the procedure, as established the legislation of Ukraine.

An investment project that can be supported by the state, under Ukrainian legislation, must meet all of the following requirements:

1. to implement investment projects in the processing industry (except for the production and circulation of tobacco, ethyl alcohol, cognac, fruits, and alcoholic beverages), further processing and/or production in Ukraine (minerals, lignite, fossil oil, natural gas processing), waste management, transport, storage, postal services, logistics, education, science and technology, health care, art, culture, sports and tourism, resorts;
2. a large-scale investment project that includes real estate development, reconstruction, technical and/or technological processing of the investment object, purchase of the necessary equipment and details that are necessary for the implementation of investment projects with large investments in infrastructure facilities;
3. large-scale production with at least 80 new working places with the average salary of employees during the implementation of the investment project, the amount of which must be at least 15 percent higher than the average salary in the region;
4. the number of large investments in investment objects during the implementation of large-scale investment projects exceeds the equivalent of 20 million euros at the official exchange rate of the National Bank of Ukraine, set on the first working day of the quarter, and for special investment agreements – the date of actual investment;
5. the term of implementation of large-scale investment projects should not exceed five years.

Assistance in the preparation and implementation of large-scale investment projects, as well as assistance in the implementation of special investment agreements by the state and local governments (if such organizations provide state support), is carried out by specially authorized bodies (Kurilo, 2011).

Functions of such a competent authority include:

1. to implement measures to attract potential applicants for large-scale investment projects;
2. to provide organizational, informational, and advisory assistance to investors in the development and implementation of large-scale investment projects on a gratuitous basis under the requirements of the legislation of Ukraine, in particular for the provision of other documents required for the submission and implementation of applications for large-scale investment projects;
3. to maintain contact with public authorities and local governments on issues related to support in the preparation and implementation of large-scale investment projects;
4. to prepare and submit to the competent authority   periodic (quarterly, annual) and operational (at the request of the competent authority) reports on the status of support for investment projects with significant investments;
5. to create and to develop departments for the preparation and implementation of large-scale investment projects for state administrative organizations, local governments, and their officials;
6. to perform other functions, related to the development and implementation of large-scale investment projects defined by law and powers of the competent authority.

The Cabinet of Ministers of Ukraine shall establish procedures for communication between applicants and the competent state and local self-government bodies, investors with large investments, public administration bodies, and territorial communities to support the preparation, organization, and implementation of large-scale investment projects.

The current legislation of Ukraine prohibits illegal interference or obstruction of the competent authority and its employees, in particular, negatively affecting or impairing the performance of the functions on attracting investments and implementing investment projects.

To ensure an effective mechanism for implementing measures aimed at strengthening social responsibility, the functions of the state and private agrarian business should be redistributed. Internal goals of stakeholder social responsibility policy represented by the state and enterprises of the agricultural sector are aimed at achieving financial and social indicators to create an effective innovation infrastructure of the agricultural sector, and external goals - to improve the image of Ukraine and agricultural at the international level. In the framework of social responsibility, agro holdings can form strategies of their social partnership with territorial communities, by signing memoranda, creating projects, programs, launching grants, skills contests, and other social agreements with local authorities with the involvement of a third stakeholder – the rural population.

Methods of state regulation to increase social responsibility of enterprises of the agricultural sector can be:

1. normative - formation of unified approaches to understanding the social responsibility of business in Ukraine; introduction of management systems and standards,  related to social responsibility; development of a regulatory framework for the implementation of eco-labeling and social labeling;
2. organizational and information - the formation of institutions whose competence would belong to the comprehensive analysis of the current situation of the agricultural sector in Ukraine and promoting its further development;
3. financial - promotion and encouragement of agrarian business through clear signals in government programs on its long-term importance, both at the state level and at the regional and community level. In particular, financing of joint projects on introduction of new forms of social responsibility, support of scientific researches in the field of social responsibility of business, etc.

Measures at the state level, which it is desirable to implement to build a model of state regulation of agricultural sector enterprises to identify large vertically integrated agribusiness structures in the processes of sustainable rural development, are:

1. introduction of an open market and settlement of agricultural land ownership relations;
2. attracting investment in the modernization of the agricultural sector, for example, production of organic farming and products of its refining;
3. improvement of the taxation system of agricultural enterprises;
4. introduction of innovative forms of cooperation between business, science, and the state.

State regulation of agricultural sector enterprises should be carried out through the introduction of a new tax mechanism. First, it is worthwhile to group agricultural producers and fix separate tax regimes for each of them; secondly, keep the current mechanism of the simplified taxation system, accounting and reporting in the form of a single tax for agricultural enterprises that are part of the agricultural holding structure, but only on vegetable growing, gardening, viticulture, livestock husbandry; thirdly, to introduce a social tax to be paid to local budgets for the actual activities of agricultural enterprises to solve the problems of rural areas. From the standpoint of determining the tax base, we offer a normative monetary valuation of agricultural land, provided that the rate of this tax must be not less than 1% of the normative monetary value per unit area of agricultural land (Law   No. 2518-VIII, 1997).

Conclusions

To substantiate further directions of agricultural development in Ukraine it is necessary to develop a fundamentally new methodological approach that would provide an opportunity to manage and regulate the field of state support for agricultural production for the future.

These areas are imperfect for today. One of the main reasons is non-compliance with the requirements of the laws of Ukraine, which has led to non-fulfillment of such strategic tasks as the development of agricultural machinery and providing agricultural producers with agricultural machinery, mineral fertilizers, and plant protection products; protection and improvement of agricultural land use; regulation of agricultural markets; crop and risk insurance; development of plant breeding and animal breeding; fisheries development, construction of social facilities in rural areas; development of agricultural science and education, etc.

Application and implementation of the concept of state regulation of the agricultural sector of the economy, based on methods of state regulation of agriculture, should also be included in the areas of state regulation of agriculture. Otherwise, it is impossible to develop approaches to the organization of agricultural markets and effective pricing, tax, credit, investment, and other policies. And, as is known, the food security of the country and the functioning of the domestic food market, and providing the rural population with jobs and social stability in society, depending on the development of the agro-industrial complex.