Instead of supporting the dairy industry in Ukraine, an additional financial burden for businesses may be introduced

20/ 04/ 2023

In March 2023, draft laws №9163 and №9162 were registered in the Verkhovna Rada on the introduction of a contribution to industry financing of dairy product promotion programs. It is assumed that the goal of these initiatives is to provide financial support for the development and sustainable growth of the dairy industry, and the result should be an improvement in the situation on the market for the production of Ukrainian dairy products through the introduction of financing mechanisms for the promotion of such products both on the domestic and global markets. Undoubtedly, in general, businesses welcomed the idea of supporting the dairy industry, because it suffered significantly during the full-scale invasion of Russia into the territory of Ukraine. In particular, due to a decrease in the number of cattle and, as a result, a decrease in raw milk. In addition, the industry has suffered significant losses due to problems with electricity, logistics, infrastructure damages, etc. For example, according to the State Statistics Service, as of the beginning of February 2022, farms of all categories kept more than 2.7 million head of cattle. During the period of the full-scale invasion, Ukraine lost more than 170,000 cows alone, of which there were about 1.6 million cows in Ukraine before the war. However, entrepreneurs had many questions during a detailed analysis of the documents. In particular, the draft Law №9163 provides for the introduction of a contribution to the industry financing of dairy product promotion programs as a source of financing measures for the promotion of dairy products, which is paid when dairy products are put into circulation by processing enterprises and importers. The size (rate) of the contribution is determined at the following level: for processing enterprises – 0.5% of the value of sold dairy products; for importers – 0.5% of the customs value of dairy products. The recipient and administrator of the contribution is a representative inter-branch organization (association of milk producers and processors). The State Customs Service of Ukraine carries out the passage of the relevant goods into the customs territory of Ukraine after payment of the contribution to the accounts of the representative inter-branch organization. Moreover, Draft Law №9162 envisages granting legislative powers in the field of information exchange to tax authorities to ensure the implementation of the provisions of Draft Law No. 9163. Given the situation described above, the business has several concerns. Firstly, the Associations experts do not fully understand the process of creation and functioning of the organization-manager of the contribution, which, presumably, can cause corruption risks, abuse, etc. Secondly, the introduction of the contribution and the application of the payment mechanism proposed by Draft Law №9163 will obviously contribute to the additional regulation of the companies activities and cause an additional financial burden for business representatives, which will further complicate the situation in the industry. It was difficult to foresee that the original idea of financial support for the development and sustainable growth of the dairy industry could place additional responsibility for the development of the industry on a business that has suffered, but still continues to contribute to the sector development, work transparently, pay taxes, etc. Therefore, the European Business Association appeals to the Chairman of the VRU Committee on Finance, Tax and Customs Policy Danylo Hetmantsev, the Chairman of the VRU Committee on Agrarian and Land Policy Oleksandr Hayda, the Chairman of the VRU Committee on Economic Development Dmytro Natalukha, Head of the VRU Committee on Budget Affairs Roksolana Pidlasa, Head of the VRU Committee on Anti-Corruption Policy Anastasia Radina, Head of the VRU Committee on Ukraines Integration into the European Union Ivanna Klympush-Tsintsadze with a request not to support these draft laws. In addition, we ask the Prime Minister of Ukraine Denys Shmygal to pay attention to this situation.

In March 2023, draft laws №9163 and №9162 were registered in the Verkhovna Rada on the introduction of a contribution to industry financing of dairy product promotion programs.

It is assumed that the goal of these initiatives is to provide financial support for the development and sustainable growth of the dairy industry, and the result should be an improvement in the situation on the market for the production of Ukrainian dairy products through the introduction of financing mechanisms for the promotion of such products both on the domestic and global markets.

Undoubtedly, in general, businesses welcomed the idea of supporting the dairy industry, because it suffered significantly during the full-scale invasion of Russia into the territory of Ukraine. In particular, due to a decrease in the number of cattle and, as a result, a decrease in raw milk. In addition, the industry has suffered significant losses due to problems with electricity, logistics, infrastructure damages, etc. For example, according to the State Statistics Service, as of the beginning of February 2022, farms of all categories kept more than 2.7 million head of cattle. During the period of the full-scale invasion, Ukraine lost more than 170,000 cows alone, of which there were about 1.6 million cows in Ukraine before the war.

However, entrepreneurs had many questions during a detailed analysis of the documents. In particular, the draft Law №9163 provides for the introduction of a contribution to the industry financing of dairy product promotion programs as a source of financing measures for the promotion of dairy products, which is paid when dairy products are put into circulation by processing enterprises and importers. The size (rate) of the contribution is determined at the following level: for processing enterprises – 0.5% of the value of sold dairy products; for importers – 0.5% of the customs value of dairy products. The recipient and administrator of the contribution is a representative inter-branch organization (association of milk producers and processors). The State Customs Service of Ukraine carries out the passage of the relevant goods into the customs territory of Ukraine after payment of the contribution to the accounts of the representative inter-branch organization.

Moreover, Draft Law №9162 envisages granting legislative powers in the field of information exchange to tax authorities to ensure the implementation of the provisions of Draft Law No. 9163.

Given the situation described above, the business has several concerns. Firstly, the Association’s experts do not fully understand the process of creation and functioning of the organization-manager of the contribution, which, presumably, can cause corruption risks, abuse, etc. Secondly, the introduction of the contribution and the application of the payment mechanism proposed by Draft Law №9163 will obviously contribute to the additional regulation of the companies’ activities and cause an additional financial burden for business representatives, which will further complicate the situation in the industry. It was difficult to foresee that the original idea of “financial support for the development and sustainable growth of the dairy industry” could place additional responsibility for the development of the industry on a business that has suffered, but still continues to contribute to the sector development, work transparently, pay taxes, etc.

Therefore, the European Business Association appeals to the Chairman of the VRU Committee on Finance, Tax and Customs Policy Danylo Hetmantsev, the Chairman of the VRU Committee on Agrarian and Land Policy Oleksandr Hayda, the Chairman of the VRU Committee on Economic Development Dmytro Natalukha, Head of the VRU Committee on Budget Affairs Roksolana Pidlasa, Head of the VRU Committee on Anti-Corruption Policy Anastasia Radina, Head of the VRU Committee on Ukraine’s Integration into the European Union Ivanna Klympush-Tsintsadze with a request not to support these draft laws. In addition, we ask the Prime Minister of Ukraine Denys Shmygal to pay attention to this situation.