Business is sounding the alarm: new tax initiatives could paralyse agricultural exports
20 August 2024 09:06
The European Business Association (EBA) has issued a statement expressing concern over the government’s latest fiscal initiatives, according to "Komersant Ukrainian"
These are the draft CMU resolution “On Amendments to the Procedure for Suspending the Registration of a Tax Invoice/Adjustment Calculation in the Unified Register of Tax Invoices” and the draft order of the Ministry of Finance “On Amendments to Certain Regulatory Acts of the Ministry of Finance of Ukraine”, recently published by the State Tax Service (STS).
The EBA appealed to the acting Head of the State Tax Service to reconsider the proposed changes, which, according to the business, pose significant risks to the normal functioning of the agricultural sector.
What worries the business
The main obstacle is the new rules for registering tax invoices for export operations. According to the draft resolution of the Cabinet of Ministers, even companies that return at least 80% of their export revenues will have to register tax invoices in the general procedure, which will lead to a loss of time and resources.
In addition, EBA experts note that the unconditional registration of invoices will be problematic for large enterprises due to possible minor violations, such as late submission of reports or the presence of an insignificant amount of tax debt.
Of particular concern is the formula for calculating the total volume of export transactions, which takes into account the amount of purchases from risky counterparties, even if the decision to consider them risky may be revoked in the future.
“The proposed approach to the amendments will effectively put the export of grain and oilseeds under manual control by possibly blocking tax invoices and calculations of adjustments to them. After all, there is no liability of the State Tax Service officials for making erroneous or deliberately unlawful decisions on the recognition of the riskiness of enterprises or transactions, which led to the losses of the exporting company as a result of blocking tax invoices and adjustment calculations”
EBA
Possible consequences
Businesses warn of potentially catastrophic consequences of the new rules. Among them:
- Blocking agricultural exports for an indefinite period of time.
- Disruption of contracts and unpredictable costs of transport and storage downtime.
- Loss of economic sense of export operations due to delays.
- A significant decrease in foreign exchange earnings for the Ukrainian economy.
- Potential collapse of the Ukrainian seaport system.
“Transparent Business is convinced that the burden of all negative consequences and responsibility for illegal transactions and tax evasion within the country should remain with the lawbreakers who directly commit such actions. Therefore, it seems appropriate to propose to exclude from the mechanism of blocking tax invoices exporters who have a positive history and have not committed abuses with non-refund of foreign exchange earnings for exported goods,”
– the EBA emphasises.
Business proposals
To solve the problem, the European Business Association offers the following:
- To exclude bona fide exporters with a positive history from the mechanism of blocking tax invoices.
- To introduce unconditional registration of tax invoices for exporters who return at least 80% of their foreign exchange earnings within the established timeframe.
- Provide for unconditional registration for exporters with a positive tax history without checking the riskiness of transactions.
“Under martial law, it is important to ensure the stable operation of the state’s economy, one of the main driving forces of which is the agricultural sector. It is an important component of food security, budgetary stability and currency stability,”
– the EBA emphasises.
The EBA has already sent a number of proposals to the State Tax Service and calls for the business community to take into account the opinion of the government to preserve Ukraine’s export potential and ensure global food security.
Meanwhile, it is proposed to fight the arbitrariness of tax authorities with the help of body cameras.
