The Verkhovna Rada passed a law extending the special regime for “Pivdenmash” and effectively “suspended” some of the standard mechanisms for debt enforcement, primarily tax-related ones, and also extended the corresponding restrictions in the area of enforcement proceedings.
The rationale for adopting the law “On Amending the Tax Code of Ukraine Regarding Support for the State Enterprise ‘O.M. Makarov” under Martial Law” dated December 17, 2025, No. 4727-IX, is clear. “Pivdenmash” is a strategic enterprise of the defense-industrial complex, and under martial law, the state seeks to avoid a scenario in which financial pressure (seizures, account freezes, enforcement proceedings) paralyzes production, disrupts contracts, and creates risks to national defense capabilities.
However, if we set aside the political rhetoric and examine the mechanics of the decision through the lens of economics and law, an uncomfortable question arises: is this truly a “cure” for the problem, or merely an expensive painkiller? After all, legislative immunity can temporarily stabilize the patient, but at the same time set a time-delayed trap for the market, the budget, and the enterprise itself.
The Anatomy of the “Legal Shield”
The structure of the “legal shield” consists of two key elements. First, the tax component: Section 10 of Chapter XX, “Transitional Provisions,” of the Tax Code has been amended by Paragraph 77, which temporarily—until January 1, 2027—establishes a special regime for “Pivdenmash.” Regulatory authorities will not take measures to collect tax debt as provided for in Articles 59–60 and 87–101 of the Tax Code (that is, broadly speaking, a “pause” in the standard procedure for collecting tax arrears).
Second, the legislature is explicitly “playing for time”: paragraph 77 thereby suspends the running of the statute of limitations set forth in paragraph 102.4 of Article 102 of the Tax Code. At the same time, in the first paragraph of paragraph 106 of Section XIII, “Final and Transitional Provisions,” of the Law “On Enforcement Proceedings,” the year “2026” has been replaced with “2027.” Thus, the debts are not canceled—however, the state limits enforcement measures for a specified period, creating a “financial corridor” for the enterprise’s survival.
Treatment or Pain Relief?
In the short term, the effect looks appealing: the enterprise gains the ability to direct its working capital toward production, salaries, repairs, procurement, and the fulfillment of defense contracts, rather than toward “firefighting” to cover debts under the pressure of asset seizures and enforcement actions. This reduces the risk of a sudden collapse and ripple effects across related supply chains.
But the economic logic behind such decisions suggests that a “freeze” is not the same as recovery. Tax and other debt obligations do not disappear—they accumulate or are deferred into the future. Unless management and financial reforms are implemented in parallel, the law merely postpones the moment of truth when the debt wave returns—often with greater consequences and fewer tools for maneuvering.
The Cost of Rescue for the Market and Society
Any “immunity” in a market economy comes at a price. When the state grants a specific entity a regime in which enforcement is significantly limited, the risks do not disappear—they are merely redistributed. Taxpayers, bona fide counterparties, and creditors effectively receive a signal: the rules may be asymmetrical, and the enforcement of obligations may be selective.
Bona fide counterparties are the first to feel the consequences. They are forced either to raise prices and require advance payments in contracts with the company, or to scale back their cooperation altogether, factoring the risk of “frozen” enforcement into their costs. Ultimately, the effect can be paradoxical: instead of recovery, we end up with higher procurement costs, a shrinking supplier market, and increased dependence on a limited circle of “risk-tolerant” partners.
Public finances are no less sensitive. When tax debt is not repaid using standard instruments, the budget loses revenue here and now, and the deficit is covered by other sources: the reallocation of expenditures, debt financing, or an increase in the tax burden on the economy. In wartime, this is particularly painful, as every deferral of payments to the state has a direct opportunity cost.
The Moral Hazard Trap
The most dangerous long-term consequence is moral hazard. If a company knows that it can obtain a legislative “shield” at a critical moment, its internal incentive to optimize costs, upgrade equipment, seek new markets, increase productivity, and ensure transparent corporate governance diminishes.
To prevent such a tool from becoming a trap, the government should build in safeguards: (1) a clear financial recovery plan with KPIs and deadlines; (2) transparent reporting and independent audits (including regarding the use of working capital during the moratorium); (3) personal accountability of management teams and mechanisms for replacing management in the event of failure to meet targets. Without this, the legislative pause will be more of an indulgence than an investment in capacity.
Conclusion
Law No. 4727-IX is symptomatic: in a state of war, the government is opting for targeted support of strategic assets, but is doing so by restricting standard debt collection mechanisms and “freezing” debt. As a short-term anti-crisis measure, this may be justified. However, as a model for the future, it risks creating a class of “zombie enterprises” that exist outside market discipline and impose costs on the entire business environment.
True recovery in strategic sectors is possible only through management reform, financial transparency, and accountability—as well as through fair competition and predictable rules. Otherwise, the economic “cocoon” turns into a slow-acting trap: it provides a reprieve today, but makes the way out more expensive and complicated tomorrow.
Author: Attorney at Law, Barrister Kirill Iordanov
Source: https://zib.com.ua/ua/170416-zakonodatelniy_immunitet_ekonomicheskiy_kokon_ili_lovushka_z.html