The experts of UCAB note that enactment of a Bill No.5300 on additional export duty will completely destroy the investment climate in Ukraine and can lead to loosing investments amounting to USD 1.2 billion annually for the agricultural sector.
Amendment of the current legislation was initiated by a group of lawmakers of the Radical Party of Ukraine including Oleh Liashko, the party leader. Bill No.5300 ‘On Amendments to Tax Code of Ukraine concerning Recovery of Animal Breeding and Development of Farm Business in Villages’. proposes introduction of additional export duty to be imposed on 60% of the Ukrainian agricultural export. Bill No.5300 stipulates incorporation to article 9 of the Tax Code Ukraine of additional customs duty (agricultural raw material fee) to be levied on companies exporting agricultural products.
They substantiate this bill by the necessity of providing state support for the livestock farming, but text of the bill says nothing about the proceeds that should be used to support agricultural sector. Following the text of explanatory note, the main purpose of incorporating the above-mentioned amendments to the Law is to promote individual and small-scale farms. It is planned that the tax rate will be 3%.
These legislative initiatives are always regarded negatively by the investors and cause capital outflow from the country. According to UCAB estimation, introduction of 3% export duty will reduce profitability of grain production by 5%. At the same time, the majority of investments related to agricultural sector are currently aimed at logistics and infrastructure projects providing the export. They have long payback period and low profitability. Therefore, imposing of additional export duties on agricultural products can make investments unattractive under these projects.
‘In 2016, comparing with the previous year, foreign direct investments in agricultural sector have increased by 39% and even exceeded the pre-crisis indices. However, export duty on agricultural products which is being hidden behind the name ‘agricultural raw material fee’ can bring back the state of affairs to the level of 2014 when due to political and economic crisis as well as beginning of the military conflict all investment projects were suspended, and agricultural sector was left without funding’- said Taras Vysotskyi, General Director of the Association ‘Ukrainian Agribusiness Club’.