The Cabinet of Ministers again transferred to Parliament for consideration a bill On Canceling the VAT Rebate on the Exporting Ferrous and Nonferrous Scrap Metal. An analogous bill was submitted to Parliament on February18. The second draft called forth reservations from the Ministry of External Economic Relations, but the Cabinet of Ministers considered them unacceptable.
Dangerous tendencies in the sphere of scrap consumption have been registered in Ukraine in recent few years. The overall collection of scrap declines annually by 25-30%, and exports keep growing. As a result domestic metallurgy does not get enough raw material. During 10 months of last year 1.7million tons of ferrous and nonferrous scrap totaling $280 million were exported from Ukraine, while the scrap deficit totaled 3 million tons.
At the same time the metallurgy branch is in no hurry to pay for the raw material it consumes, producing the high debts of the Vtormet enterprises to scrap suppliers. As a result they have refused to cooperate with Vtormet and increased supplies to other organizations, including scrap exports.
The government sees the solution to the problems in canceling the VAT rebates on scrap exports. This should decrease scrap exports from Ukraine and secure raw material for Ukrainian metallurgy. It should also cut budget expenditures by $30-35 million.
The External Economic Relations Ministry remarks cast doubt on the wisdom of this decision. According to experts, it would be more effective to fix the VAT rate at 20% and keep the rebate. Moreover, this would let Ukraine count on additional state budget revenues. However, the government remained adamant, stating that according to existing principles of taxation in this case a zero tax rate is stipulated. Detailed research of government suggestions regarding amendments to the law of Ukraine On the VAT showed them to be only about VAT rebate elimination. With this particular purpose it is suggested to add to the article 5 of the law On the VAT a special norm which would free metal scrap export from VAT. Eliminating such operations from the list of those which are taxed at the zero rate is also suggested.
All these maneuvers and camouflage have only one purpose: to convert metal waste export from "taxed at the zero rate" to "freed from VAT". These two categories seem to be the same, but you can be sure that this change will bring a lot of profit to somebody. Otherwise the Cabinet of Ministers would not have submitted this bill a second time.
Photo by Leonid BAKKA,The Day:
Metallurgy's daily bread comes from a zone of tremendous competition







