Industrialists and businessmen are concerned about the disruption to the process of decision making by the Ukrainian parliament on the abolition of additional tax set for most of imported goods at 10% and 5%. It is critically important for Ukrainian producers to reduce spending on imported raw materials and components, since conditions for doing business on the domestic market are already harsh: there is no tax reform, there are no programs for industry development, and producers have no access to credits at reasonable rates. It is only the cancellation of the above-mentioned taxes that will provide industrialists with easier access to the resources they need, it will stimulate the domestic market that has found itself in stagnation, according to the Ukrainian League of Industrialists and Entrepreneurs (ULIE).
"Such a decision would reduce the price of imported goods for the population, but more importantly, it would make raw materials and components more affordable to domestic producers. It is a well-known fact that Ukrainian producers are highly dependent on imports. Keeping the taxes will be another blow to them, which they have already had enough. Working capital is being depleted: the government has not only accumulated UAH 47 billion in debt to businesses (delayed VAT refunds and advance payment of corporate profit tax), but it has also been conducting ill-designed fiscal, monetary and administrative policies regarding the industry, small and medium enterprises," ULIE President and Chairman of the Anti-Crisis Council of Non-Governmental Organizations Anatoliy Kinakh said.
According to him, the negative effects caused by the introduction of the taxes, which translated into higher prices of raw materials, technologies, equipment, components, have long outweighed the fiscal effect of such a measure. As a result, domestic production continues declining, and prices of domestically produced goods both on foreign and domestic markets have been growing. It will by no means contribute to the competitiveness of the Ukrainian businesses.
"We are seeing an illogical situation when Ukrainian households whose purchasing power has contracted by a quarter cannot afford domestic goods! What kind of economic development are we talking about?" the business community leader wondered.
The ULIE president stressed that the duties that were introduced at the beginning of the year were aimed at stabilizing Ukraine's balance of payments and creating an important source of budget revenues. Yet, none of those targets have been achieved, while industrial production has declined by 15.4%, exports have fallen by 35%, with retail trade that have shrunk significantly. The numbers speak for themselves. Therefore, any delay in the cancellation of the taxes leads to the aggravation of the financial crisis in Ukraine and brings part of businesses to the verge of existence.
"We cannot safeguard the domestic market or businesses with taxes alone – we may destroy it. On the contrary, when producers get access to needed materials and technologies, i.e. to critical imports, they can develop production, increase its added value, thus stabilizing prices, and successfully enter export markets and stay competitive both in Ukraine and abroad. This, in turn, will translate into economic development, an increase in tax revenues of the state budget and, which is very important too, more jobs," the ULIE president said.
As it is known, the additional import tax at a rate of 5% and 10% was introduced earlier this year to stabilize the balance of payments of Ukraine. Overall, it applies to about 100 commodity groups, except for so-called "critical imports": fuel, some types of medical products, etc. According to agreements with the IMF and the EU, the import tax had to be abolished by the end of 2015.
The ULIE and the Anti-Crisis Council of Non-Governmental Organizations of Ukraine urge parliamentarians to consider this issue as soon as possible and cancel the additional import duty.