Ukraine meat industry fights to preserve tax breaks
However, from the beginning of 2015 this will be cancelled, according to an updated memorandum on the reforms Ukraine should take to receive support from the International Monetary Fund (IMF), dated 29 August 2014.
At the same time, Ukraine meat industry participants and social unions have promised they will not go down without a fight and will struggle for the preservation of tax breaks, as they are crucial to the survival of the country’s livestock industry.
"We will extend the preferential treatment of VAT collection for farmers through October and will probably leave it up to the end of 2014," said the country’s Ministry of Agrarian Policy and Food. "At the same time, after a discussion in the government with participation from the private sector, by the end of September we will present proposals for a reform of VAT collection and the transfer of the agricultural sector to the basic tax mode."
According to the memorandum, putting an end to the current preferential tax system for Ukraine’s farmers was a key point of the reform program approved by the IMF’s board of directors.
Experts have suggested that, due to the reform, the tax breaks will result in all the country’s poultry farms, as well as 80% of dairy and pig farms, going out of business. The total losses from these farms, as well as income to the country’s budget, should amount to UAH20bn (US$1.5bn).
Ukraine agricultural analyst Andrei Krasnov said the reform will have a huge impact on the country’s meat producers. He suggested that more than 60% of Ukraine’s livestock enterprises will become unprofitable. "And those that do survive will try to disguise part of their turnover [to avoid paying tax]. It is also possible we may see an outflow of foreign investors, who have been actively investing in the development of Ukraine’s agro-industrial complexes since the tax breaks on VAT for farmers were adopted," he explained.
Previously, the Ukraine Agricultural Business Club had stated that the reform could bring serious losses to the country’s meat producers.
Viktor Medvedchuk, head of the country’s social movement ‘Ukraine’s Choice’, has criticised the decision to cancel tax benefits to farmers, claiming that "all US and European producers have even higher state support and, without these tax breaks, Ukraine producers can lose a substantial level of competitiveness".
Analysts estimate that the cancellation of tax benefits would affect about 56,000 farming households, which employ more than 650,000 people. The total number of meat producers that would become unprofitable could grow from the current 17-30% to more than 50%.
