The state budget may receive millions of hryvnias from de-shadowing the used car market, – ЕВА

06/ 07/ 2023

The European Business Association appeals to Serhii Marchenko, the Minister of Finance of Ukraine, and to Roksolana Pidlasa, the Chairman of the Budget Committee of Verkhovna Rada, regarding the deregulation of the registration procedure for trade organizations of used cars and the formalization of the used car trading market. According to businesses estimates, the procedure for buying and selling used cars through these trade organizations is quite complex. This situation leads to a significant portion of used car resales being carried out by auto-businessmen who do not officially register with the Main Service Center of the Ministry of Internal Affairs of Ukraine. Instead, they resell used cars through shadow schemes, such as selling through a power of attorney from the seller to a third party, commission sales with minimal commission fees, and so on. As a result, the state loses millions of hryvnias in tax revenues, which would be particularly crucial for the country, especially now. The proposed solution is draft law No. 9083, which the community unequivocally supports. The draft law suggests that instead of re-registering the vehicle from the seller to the business entity, the owner would deregister the vehicle before transferring it to the business entity for further sale. Additionally, the re-registration of the auto from the business entity to the end customer would be transformed into a state registration of the vehicle, with no change in the cost of the administrative service provided in this process. Implementing these regulations does not require funding from the state and local budgets. Furthermore, these innovations will not reduce budget revenues. On the contrary, the state budget will benefit from them. This will help formalize the used car market, resulting in additional revenue from each sold used car. For example, business representatives have calculated that the state budget will receive 19,800 UAH from used car sales worth 600,000 UAH. Thus, even a few hundred vehicles will contribute millions of UAH to the budget through taxes. Therefore, the EBA asks the Ministry of Finance and the relevant Committee of the Verkhovna Rada to support the adoption of Draft Law No. 9083 within their jurisdiction. This will serve as a tangible confirmation of the states commitment to combating the shadow economy, which, unfortunately, according to various estimates, still accounts for around 30% or more of the economy, depending on the industry.

According to businesses’ estimates, the procedure for buying and selling used cars through these trade organizations is quite complex. This situation leads to a significant portion of used car resales being carried out by auto-businessmen who do not officially register with the Main Service Center of the Ministry of Internal Affairs of Ukraine. Instead, they resell used cars through “shadow” schemes, such as selling through a power of attorney from the seller to a third party, commission sales with minimal commission fees, and so on. As a result, the state loses millions of hryvnias in tax revenues, which would be particularly crucial for the country, especially now.

The proposed solution is draft law No. 9083, which the community unequivocally supports.

The draft law suggests that instead of re-registering the vehicle from the seller to the business entity, the owner would deregister the vehicle before transferring it to the business entity for further sale. Additionally, the re-registration of the auto from the business entity to the end customer would be transformed into a state registration of the vehicle, with no change in the cost of the administrative service provided in this process.

Implementing these regulations does not require funding from the state and local budgets. Furthermore, these innovations will not reduce budget revenues. On the contrary, the state budget will benefit from them. This will help formalize the used car market, resulting in additional revenue from each sold used car. For example, business representatives have calculated that the state budget will receive 19,800 UAH from used car sales worth 600,000 UAH. Thus, even a few hundred vehicles will contribute millions of UAH to the budget through taxes.

Therefore, the EBA asks the Ministry of Finance and the relevant Committee of the Verkhovna Rada to support the adoption of Draft Law No. 9083 within their jurisdiction. This will serve as a tangible confirmation of the state’s commitment to combating the shadow economy, which, unfortunately, according to various estimates, still accounts for around 30% or more of the economy, depending on the industry.