Will we have back the export VAT for oilseeds?

In recent months, the theme of “oilseed amendments” has become one of the most notable in the media environment of our state.

Indeed, what we have seen over the last months were tens of billions of hryvnias lost by farmers, two all-Ukrainian agrarian assemblies, blocked roads, numerous rallies outside the state bodies, and as if a deliberate ignoring of the problem at various levels of government. Yet, despite the seeming deafness and blindness of the authorities, the agrarians have not given up and decided to remain steadfast to the last. In fact, they have no other choice but to demand with radical and determined methods the return of the money they had earned themselves. And instead of preparing for the sowing campaign, in February-March agricultural producers were forced to block one of the largest highways of our state.

In my opinion, agrarians have every right to this given the fact that on December 7, 2017, having violated numerous regulations of the Verkhovna Rada, parliamentarians adopted an unprecedented and surprisingly daring decision, the purpose of which was the abolition of VAT refunds for oilseeds export operations. Without any preliminary discussion with leading agrarian associations and the relevant committee, not to mention farmers themselves, the Verkhovna Rada passed a regulation which will deprive ordinary farmers of 15-18 billion hryvnias annually.

So it turns out that because of the whims of certain political and business groups, farmers will not receive VAT refunds, they will be cut off from the sale of oilseeds for export, which will make the sale of raw materials at the domestic market the only possible option. This, in turn, will cause a fall in domestic purchase prices for soybeans and rape by 16-17%. That is, in the middle of the season, farmers – some of whom even had preliminary contracts for the supply of products – were informed of a single option they were going to have and were confronted with an accomplished fact that they would be deprived of billions of hryvnias every year. I want to remind you that we already had a similar situation earlier when the regulation on the non-reimbursement of VAT on grain, sunflower and rapeseed export was in operation for several years. As a result, Ukrainian producers lost 16-20% of world prices, which led to enormous losses on a nationwide scale.

The statements of the supporters of preserving the “oilseed amendments” look quite false and absurd. They say this is a temporary measure, Ukraine needs three years to increase production capacities for its own processing, etc. However, only few people openly say that over these years, small and medium farming enterprises will provide oligarchs with about 40 billion hryvnias. Everyone forgets that in the past 7-10 years, oil and fat companies were actively building plants, which unbalanced the market and caused a drop in marginality and loading of these factories with raw materials for processing.

According to the official data of Ukroilprom and branch experts of the National Academy of Agrarian Sciences, the current capacities for processing sunflower, soybean and rapeseed are used by about 70%. That is, the words of the lobbyists of the “oilseed amendments” about the necessity of the temporary measures on non-reimbursement of VAT for the sake of a quick build-up of additional processing capacities look hypocritical and manipulative, since even the existing plants are not completely loaded with raw materials. It is clear that there is no point in building new processing capacities under such conditions.

At the same time, my position, which has been repeatedly voiced, remains unchanged – I have never been and will not be against the processors. Moreover, I am convinced that the domestic processing industry should be supported – not only the oil and fat industry, but also by the dairy, flour-milling industry, vegetable and fruit production, and other areas. It is wrong to let the processors enrich at the expense of the withdrawal of funds from commodity producers by such barbaric methods. State support should not be focused on one particular group while causing irreparable harm to another. This approach only manifests the authorities’ lack of professionalism and the shortsightedness of the economic policy.

It is necessary to seek a single balanced support mechanism for both processors and producers, instead of promoting initiatives in favour of a narrow range of stakeholders.

Presently, 14 regional councils and about 40 district councils have decided to support the adoption of the bill number 7403-2. From the very beginning, this position was completely shared by the leading agrarian associations – the All-Ukrainian Agrarian Council, the Ukrainian Agrarian Confederation, the Ukrainian Agrarian Business Club, the All-Ukrainian Association of Village and Town Councils, the Agrarian Union of Ukraine, as well as the Business Varta. Inside the Verkhovna Rada, we have repeatedly heard statements about the support for the bill from the MPs of various factions and groups. Members of the agrarian committee have signed an appeal about the need for urgent consideration of the bill; hundreds of deputies in the session hall also share this position.

Despite such a broad support, surprisingly strange publications and comments have been appearing in the media space stating that the supporters of preserving 15 billion hryvnias in the hands of Ukrainian agrarians are working to the benefit of Russian enterprises and dream of making Ukraine nothing more than a raw material appendage in the world economic situation. Never before has a Ukrainian farmer who grows soy or rape at his farm been so close to being called Kremlin’s agent. This is how the authorities are fighting now with all inconvenient for them issues. It is clear that these accusations are unsubstantiated and ridiculous. Farmers are fighting, taking part in rallies, blocking roads – it is obvious that they are doing this not for the business of the aggressor country, but for themselves and to protect their own money.

On March 21, there was another event on the way to the cancellation of the “oilseed amendments” and restoration of a fair attitude to the commodity producers of our state. At the meeting of the Committee on Tax and Customs Policy of the Verkhovna Rada, after a long and heated discussion, it was decided to recommend the parliament to adopt the bill #7403-2 as a basis. Despite all the resistance from the opposite side, the complexity and tension of the negotiations, we have achieved the necessary for the agricultural sector decision of the relevant committee.

We hope that this decision will be a turning point in the issue of renewing the refund of export VAT on oilseeds. Agrarians have already suffered a lot in recent years – the abolition of the special regime of VAT, state support for the most profitable branches of the agro-industrial complex, introduction of a system of pseudo-subsidies, illegal takeovers, problems with logistics, and the like. The agricultural sector may not survive another blow like this. Therefore, now the fate of millions of farmers is in the hands of parliamentarians. Very soon we will see whether the MPs are ready to fulfill the requirements of the agrarians who elected them. It will be easy to identify those who really listen to the people, and those who play into the hands of individual monopolistic business groups. In case the parliament fails to fulfill the requirements set forth by the agrarians, it seems to me, this time there will be something worse than blocked roads. Therefore, the parliament should make every effort, demonstrate its professionalism and unity, and prevent such scenarios.

Ivan Miroshnichenko
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