July 13, 2010

Ukraine’s Fiscal Policy Hurts National Exporters

Ukraine's fiscal policy forces the national exporters to a bankruptcy. A large number of export-oriented companies complain that the state refused to issue VAT (value-added tax) refunds because of exponentially increasing foreign and national debts. In Ukraine the Commerce Code and the Tax Code clearly state that the exporting companies should receive VAT refunds to avoid a double taxation because their products are subject to VAT in the importing countries. The state, however, issues tax refunds only to few companies that supported President Yanukovich in the 2010 Presidential elections. Other companies have to pay a high price for their political views. One of the largest steel-exporters, Arcelor Mittal, plans to lay off thousands of workers if the company does not receive VAT refund in the amount of $312 million (2.5 billion UAH). A transnational agro-producing corporation, Cargill, left the Ukrainian grain market because the government refused to reimburse VAT in the amount of $100 million (800 million UAH). Other exporters also face potential downsizing if the state defaults on VAT liabilities.

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