Ukraine's tax policy kills national exporters

[leonidas]

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.

[stepanstas]

What else could we expect from our dear Yanukovich. Another article worth reading. German businessman suing Yanukovich.

German businessman to file claim against Yanukovych, says Deutsche Welle

German businessman and founder of Cutmetall Ukraine Reinhard Maeder is to take Ukrainian President Viktor Yanukovych to court concerning VAT non-reimbursement, Germany's Deutsche Welle radio has reported.

According to the radio station, early this year Ukraine paid Hr 2 million in VAT debts to the firm with the help of the German Embassy. The German businessman has claims against Ukraine for material losses to his company. Maeder also did not rule out his filing an appeal for compensation for moral damages.

"Since 2009, the company, at which 100 Ukrainian employees worked, has not even been able to pay salaries. At that time, the company had orders for three months in advance, but due to the fact that there were no funds to purchase raw materials, because all the money was taken for VAT and not returned, all of our clients withdrew their orders. My co-founder from Germany demanded the return of all investments to Germany. I was forced to lay off people and sell some equipment to pay debts," said the businessman.

The defendants in the case are the State Tax Administration of Ukraine and President Yanukovych, as the guarantor of the Ukrainian Constitution.

A lawyer for Cutmetall Ukraine, Stepan Filin, said that the untimely fulfillment of liabilities on VAT reimbursement is a violation of the constitution, as a state body – the tax administration – acted illegally.

He said he was convinced that only president's participation in the case would mean that it would be heard without bias, as Ukraine has great problems with its court system.

[Gotno Gizmo]

Originally Posted by leonidas

Ukraine's fiscal policy forces the national exporters to a bankruptcy.

I'm not adequately advised as too this comment, but Ukraine is apparently profitable enough for some of the "Smart Money" global companies to be moving in. I attach a photo of a popiular Ukrainiain food product aquired by Nestle. I wonder what attracted them here, was it cheap labour and production costs, or was it a tax break offered by the Ukrainain government?
If it was cheap labour, then the message to the workers there is dont ask for a pay rise or you'll be replaced by other workers prepared to work cheaper out of desperation.
If it's because of tax break benefits, then the Ukrainan government better not remove the tax breaks, or Nestle will close the factory and transfer the legally owned brand elsewhere for production (Moldavia perhaps?) sending it back to Ukraine for consumption, because that's what they do in other countries.

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[Gotno Gizmo]

Originally Posted by leonidas

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. [B ]The state, however, issues tax refunds only to few companies that supported President Yanukovich in the 2010 Presidential elections.[/B] 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).

This post should really be in my "Smart Money Rule of Government" thread because I argue here that governments are now weaker than the multi-national corporations, and that governments take them on at their own risk. Leonidas highlighted the issue of refusal by the current Ukrainian government to award VAT tax refunds to certain exporters. Yanukovich and his team have seemingly caused the predicted reduction of Arcelor Mittal's Ukrainian steel production as the most recent Reuters figures now illustrate (shown below).
President Yanukovich will now learn that if you take on Arcelor Mittals CEO Lasksmi Mittal (number 4 in Forbes Rich List - $28.7 Billion USD), that unless your extremely smart , you will probably be the loser.
Well done Yanuk, you have lost your country millions of dollars revenue and caused Ukraine's unemployment figures to rise.

KIEV, March 11 (Reuters) - Ukraine's largest steel mill,
owned by ArcelorMittal (ISPA.AS) (MT.N), reduced crude steel
production to 890,400 tonnes in the first two months of this
year from 948,500 a year earlier, the plant said on Friday. The following are details of production in the plant

COMMODITY JAN-FEB 2011 (tonnes) Jan-Feb 10 (tonnes)
Steel 890,400 ------------------------ 948,500
Pig iron 767,800 ------------------------ 840,200
Rolled steel 796,900 ------------------------ 833,200

[leonidas]

@ Gotno Gizmo
Nice data!!! So the VAT reimbursement mess had a significant and negative impact on one of the largest foreign companies of Ukraine.
HT Gotno Gizmo