Legislators own up to agrarian crisis

The Verkhovna Rada of Ukraine acknowledged the crisis in the agroindustrial complex (AIC) in a resolution passed on Sept. 23, 2005, after hearing the cabinet’s progress report.

The resolution reads that the cabinet is instructed to include in its structure the post of deputy prime minister in charge of the AIC and that the government must formulate a bill “On Amendments to the Law of Ukraine ‘On the State Budget of Ukraine for the Year 2005’.” The bill must provide for increased budget spending; these additional appropriations are meant primarily for the Agrarian Fund to form state food reserves to carry out interventions and secure supply bonds on the grain and sugar markets (1.2 billion hryvnias), by way of financial support of AIC businesses — making short- and long-term loans (120 million hryvnias) less expensive — and financial support of produce and livestock suppliers (305 million hryvnias).

The cabinet is further instructed to resolve, “in keeping with established procedures,” the matter of fixing the minimum price of one ton of sugar beets at 225 hryvnias and for the resulting sugar at 3,150 hryvnias (VAT included). Parliament’s resolution also states that a plenary meeting of this session, to be held in October-November, will hear a number of bills, especially those amending certain laws of Ukraine, concerning state control over prices, as well as changes to the VAT law — specifically with regard to special taxation procedures binding on agricultural producers.

In mid-September 2005, another attempt was made to solve one of the most acute problems of the AIC: refunding VAT payments to grain traders. During a meeting between the board of the State Tax Administration of Ukraine and companies exporting grain and other farm products, STAU chief Oleksandr Kyreiev declared that the problem must be resolved by October- November.

During the meeting it was stated that the STAU has amended its directive concerning inspections by tax authorities. In particular, VAT compensations will be made after “counter-inspections,” with the tax authorities reserving the right to challenge such VAT compensations in court, in case of evidence of VAT evasions in any other links of the business chain. This simplified procedure of checking the sums of liabilities will apply primarily to exporters that have been operating in the market for a number of years with no “criminal record” in the taxation realm.

Grain exporters, in turn, stressed that the presence of a heavy backlog of VAT compensation payments not only reduces the opportunity to boost farm purchasing prices, but also has a negative effect on the investment climate in Ukraine’s agroindustrial complex.