Cancelation of tax benefits to touch almost all agricultural business in Ukraine, to stop sector development, say experts
The revision of tax benefits in agriculture proposed by the government will touch almost all agricultural producers and will lead to losses of many of them, especially livestock companies.
The option was presented by Director General of the Ukrainian Agribusiness Club (UCAB) Volodymyr Lapa, Chairman of the Union of Poultry Breeders Oleksandr Bakumenko, Deputy Board Chairperson at Svarog West Group Inna Meteleva at a press conference at Interfax-Ukraine on Tuesday, July 22.
The experts said that the criteria for retaining tax benefits to agricultural companies defined by the government are unjustifiable – over UAH 20 million of annual income and no more than 1,000 hectares under cultivation.
"According to our assessments, the share of agricultural holdings in the structure of land utilization is around 25-26%. Around 65-66% is medium-sized agricultural companies and only 10-15% are small farms. So 90% of the sector will lose tax benefits," Lapa said.
He said that the investment in the modern agricultural machinery and technologies for 1,000 hectares is economically unreasonable, and small companies are not efficient and uncompetitive.
Meteleva said that if for plant growing the bill foresees compensators with the cancellation of tax benefits – the resumption of value added tax refunding during exports of products, livestock sector, which requires more investment and has a longer payback period is left without any support.
"If we speak about the cancellation of the beneficial taxation regime, the livestock sector will suffer first – it is oriented to the domestic market," she said, adding that today livestock breeding in Ukraine is not a business, but a social project.
Along with crisis due to the closure of the Russian market for Ukrainian dairy products, the fall in purchase prices of milk, the high cost of loans, etc, the cancellation of the fixed agricultural tax and the right to accumulate value added tax will result in the reduction of cattle numbers and production volumes, the experts said. The same situation could be seen in plant growing where the margin for grain production in 2013 came to 2%, according to statistics.
According to the UCAB, if the bill is passed, the positive effect will be no more than UAH 2-3 billion, but it will last not for a long period of time: many companies will have to stop operation and dismiss employees.
Head of the Agrarian Union of Ukraine Hennadiy Novikov said that there are other ways of increasing taxes from the agricultural sector without the cancellation of tax benefits.
He said that with the revision of the taxation regime for agriculture it would not more acceptable to introduce a single agricultural tax, which is collected from one hectare of land, taking into account climate. The taxation base will be the pecuniary appraisal of farmland updated as of early reporting period. The working group of the Agrarian Union of Ukraine is drawing up the relevant proposals.
Novikov said that the schemes of shadow cultivation of land should be removed.
"According to statistics, around 20 million hectares take part in paying taxes. How much land is there in total? Only arable land amounts to 30 million hectares. The question is where another 10 million hectares?" he said.
As reported, the Cabinet of Ministers on July 21, 2014 registered draft law No. 4309A, which, in particular, foresees that the fixed agricultural tax and a special regime of accumulating value added tax (VAT) is canceled for agricultural companies for which annual turnover (apart from imports) exceeds UAH 20 million and that have 1,000 hectares under processing.