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The additional 10% tax on farm produce and the 5% tax on other types of produce which were introduced in Ukraine in February this year have only had a negative impact on the economic situation of individual enterprises, importers, and on state budget revenues. This was announced during a roundtable meeting at the Ukrainian League of Industrialists and Entrepreneurs (ULIE) with the participation of head of the Anti-Crisis Council of NGOs and ULIE President Anatoliy Kinakh, and head of the State Fiscal Service of Ukraine Roman Nasirov.
The participants of the meeting stressed that import taxes have depleted working capital, increased the costs of products/services, and have caused companies to lose their competitiveness.
A separate issue is the impact of the import taxes on enterprises that produce goods using imported equipment, raw materials, components, and technologies. This is a sector which produces technically complex, value-added products that could be in demand in foreign markets and could form the basis of the revival of domestic commodity production.
The Institute for Economic Research has calculated the share of imported raw materials and components in different sectors of the Ukrainian economy. In particular, imported raw materials account for 21.4% in agriculture, 20.1% in food production, 47.4% in metal processing, and 55.4% in the chemical industry. Consequently, the additional import taxes and additional amounts of VAT raise production costs by 3-5% and even by 7% in some areas.
"Amid the 16.3% decline in GDP and a 35.9% decline in exports in the first half, the further steps taken by the authorities that have led to depletion of assets, price hikes and the worsening of domestic producers' competitiveness looks like a failure. A study by the State Research Institute of Informatization and Economic Modelling shows that it is the additional import tax which by the end of 2015 will reduce gross added value in the economy by on average 18.5%, push domestic prices up by 9.4% and export prices of domestic products by 7.4% up. The budget will fall short of about UAH 36.3 billion in taxes from economic entities. Therefore, the industrial community stands for the abolition of the additional import taxes," Kinakh said.
Nasirov in turn said that the additional import tax was introduced as a temporary measure, stressing that if the business community insists on its cancellation, then their position must be taken into account.
Representatives from economic sectors including agriculture, food production, the dairy industry, paint production, the light industry and others expressed the view that additional import taxes are a counterproductive factor that worsens the economic situation. Thus, any delay in the decision on its cancellation could cause the aggravation of the financial situation in the domestic economy and put some companies onto the brink of existence.
The participants prepared an address to the country's leaders, appealing to them to immediately lift the additional import taxes, as well as asking the Verkhovna Rada of Ukraine to adopt bill No. 2674 dated April 20, 2015, on recognition as void the Law of Ukraine on measures to stabilize Ukraine's balance of payments in accordance with Article XII of the General Agreement on Tariffs and Trade 1994.