Verkhovna Rada voted for
the new version of the national budget and increased taxes and fees

The Cabinet took over MPs and defended all its amendments

Photo: Ivan Chernichkin

At the second attempt the VR supported the government bills on introduction of amendments to the Tax Code (TC) and the Law On the National Budget for the current year. Consultations on possible changes to these bills started immediately after the failed vote last Thursday and lasted until last night. Review of the documents in the session hall took place behind closed doors. Deputy Chair of the Committee on Social Policy and Labor Pavlo Rozenko wrote on his Facebook page that 306 MPs supported the changes to the TC and 305 MPs supported amendments to the budget.

Fresh proposal

Only yesterday morning the Cabinet registered the updated version of the Law On the National Budget with revenues amounting to UAH 377.8 bn and expenditures of UAH 441.6 bn in the parliament. The maximum level of the government debt was approved at UAH 806.9 bn. In addition to amendments to the national budget the government introduced an updated version of amendments to the Tax Code.

Unlike in the previous version (not supported by MPs on July 24), the new version of the document suggests introduction of electronic administration of the VAT, an increase in specific rates of the excise tax on cigarettes with and without filters by 5% and introduction of tax collection on personal incomes at the rate of 1.5%.

Temporarily, until January 1, 2015 the law introduces taxation of alternative fuels at the rate of EUR 99 per ton. So far, no excise duties were levied from alternative fuels. Initially, however, the government proposed to introduce excise duties on alternative fuels at the level of EUR 139 per ton and the struggle with the shadow market was named the main reason for such changes.

For the same period the law increases the rates for the use of natural gas deposits at a depth of 5 km – from 28% to 55%, for use of deposits at the depth beyond 5 km – from 15% to 28%. For oil and gas condensate rates will be fixed at 45% and 21%, depending on the depth of deposits. Fees for the extraction of iron ore will be 8% of its production cost by the end of year with regard to the content of chemically pure metal.

As it was planned earlier, the parliament extended the regime of exemption from VAT on grain export operations till 2015 and deprived a number of industries of benefits for profit tax, while retaining the special VAT regime for farmers. “All three provisions regarding unpaid leaves for state employees (teachers, medical workers, scientists, cultural workers, etc.) were removed from the draft of the national budget. Indexation of pensions will be resumed this year,” said Rozenko.

Finishing touches

Capital found out that MPs could not agree with the government on the final versions of the bills up until the very last minute. Moreover, according to MP Yuriy Syrotyuk (Svoboda), the VR was forced to adjourn for additional discussion and agreeing on the amendments to sequestration of the budget 2014 upon the initiative of the Economic Development and For a United Sovereign Ukraine parliamentary groups.

However, only few amendments have been made. There were two main ones. First Deputy Head of the VR Budget Committee Oksana Kaletnyk specified that earlier the final provisions of the Law On the National Budget contained a condition according to which certain social benefits, such as compensation for children of war, would be funded on the basis of availability of funds in the budget. “This provision did not allow people to go to court and demand from the state payment of benefits and allowances. Last year it was excluded from the law. And now it has been reintroduced,” said the MP. She added that the amount is close to UAH 170 bn per year. In 2012, the appearance of such a rule in the Law on the National Budget caused a wave of mass protests across the country, as well as harsh criticism of experts and then opposition represented by the Batkivshchyna party.

The majority of parliamentarians supported the introduction of electronic administration of the VAT as of January 1, 2015. The original version of the document proposed to introduce this mechanism in November. According to member of the VR Committee on Taxation and Customs Policy Serhiy Teryokhin (Batkivshchyna); the rest of the proposals of the Ministry of Finance on tax rates remained unchanged. As it was stated in the memorandum to the bill, this year amendments to the Tax Code approved by the MPs should provide the national treasury with additional revenues of UAH 10.3 bn.