European Business Association asks not to complicate Ukrainian agrarian exports with excessive tax regulations
MOSCOW. Nov 22 (Interfax) - The European Business Association (EBA) has asked the Ukrainian parliament to demonstrate a balanced approach to the adoption of bills adjusting taxation of agricultural exports, Ukrainian media said, citing the EBA.
The EBA said that a number of bills amending grain export regulations had been recently registered in the Verkhovna Rada. Their authors said that the bills would fight illegal exports, in particular, by minimizing the common tax evasion schemes in which certain grains and oilseeds are taken outside the Ukrainian customs territory.
"In the opinion of business, the mechanisms on which the documents are based will have the opposite effect. For instance, one of the bills practically introduces a non-transparent, complicated manual mechanism of clearing market actors for agricultural exports, which is inadmissible in a country that proclaimed an anti-corruption course. It is also planned to change the procedure for VAT refund, which would throw the country ten years back when the VAT refund was an unpredictable process and would discourage international investors," the EBA said.
The association believes that the proposed changes might create unfavorable market climate and have negative implications for the entire sector, especially now, considering the critical need for the maximum provision of grain exports constrained by the crisis.
"The bills propose innovations extremely burdensome for farmers who, despite a decline in production, are taking utmost efforts to grow and store agricultural crops and to provide the country with food," the EBA said.
What is more, certain provisions of the bill will introduce a new VAT refund procedure, i.e. budget compensation as a percentage of the foreign currency earnings received.
"It is practically impossible to monitor which particular goods are exported and which goods earned foreign currency. The reason is that agricultural products are generic goods stored and shipped in bulk, rather than separate batches with separate tax invoices. This allows the regulatory authority to refuse a VAT refund without the practical possibility for the taxpayer to prove the legality of the VAT claimed for refund," the experts said, adding that created an additional risk for those processing agrarian products.
Therefore, VAT refund to oil, meal and husk exporters would be a discriminatory decision of a tax body and cause long legal disputes to delay VAT refund and to flush out working capital, they said.
The bill sets a 10% export duty on goods for which an exporter has not registered an export tax invoice. This may prompt the regulatory authority to deliberately delay the registration process and/or unjustifiably stop the registration of the tax invoice in order to induce the exporter to pay export duty.
The bills introduce a system of confirmation of the origin of agricultural products through the State Agrarian Register, which, in the opinion of business, needs an upgrade, given the existent of a complex introduction and functioning mechanism.
The EBA thinks that the adoption of the bills might create risks of corruption due to the possible manual regulation of exports, would significantly complicate work processes of exporters, would cause shipping delays and would generally endanger the possibility of Ukrainian agrarian exports.
"The association asks the government and lawmakers to take a thoughtful approach to the process of legislative changes regarding the export of agricultural products, making informed, rather than hasty, contradictory and risky decisions," the EBA said, adding that the recently introduced procedure for verification of agricultural exporters duplicated the targets set by the bill authors.