MPs, experts of the Verkhovna Rada and managers of associations of Ukrainian manufacturers are called for the government to cancel an additional 5% excise duty on retail sales of excisable goods at a meeting of parliament’s Committee on Taxation and Customs Policy on Tuesday.
With the introduction of the additional 5% excise duty, the number of tax returns that businesses have to submit rose by a total of more than 150,000 per month. This has also adversely affected the labor market, experts say.
The introduction of the tax on retail sales of excisable goods is also a problem for the executive and legislative branches, experts say. First, in order to collect this tax, the State Fiscal Service has to deal with over 150,000 monthly tax returns submitted by companies, which is a serious burden both for business and the service itself. Second, a new excise duty in fact is being imposed on the existing excise duty, which experts said was unfair and absurd. Third, the tax on retail sales is extremely difficult to administer. And, finally, the introduction of this excise duty runs contrary to European tax legislation and the principles of tax policy, the experts from the parliament committee say.
Previously, the Committee on Taxation and Customs Policy sent an official letter to the Cabinet of Ministers in which it suggested that the tax be abolished.
According to deputies, "as a result of introducing the additional excise duty, local communities are now interested in increasing the consumption of beer, alcoholic beverages and tobacco products by people – a fact that directly determines the amount of revenues to the local budgets. This is not consistent with one of the key functions of the excise tax – to reduce the harmful effects of these products on human health."
The new tax was also harshly criticized by Ukrainian producers.
CEO of the Ukrvodka Association Volodymyr Ostapiuk complained that "from the very beginning, we were totally against this tax.”
“We are paying VAT, excise duties and now another excise tax on top of the price, which already includes VAT and excise. The government expects to raise an additional UAH 8 billion in revenues for the budget, while overlooking the losses caused by introduction of such tax.
“Due to the sharp increase in excise duties, over the past year production in the vodka industry has declined by 20%, accompanied by 30% job cuts. In a situation of economic crisis, when each and every working place matters, we see decisions being made that force manufacturers to cut production and lay off employees.
"Petroleum products are excisable goods, but their value determines greatly the cost of other goods and services that require transportation,” said Leonid Kosianchuk, President of the Association of Operators of Petroleum Products Market of Ukraine.
“We’ve got a new excise tax, which is required to be accrued on an existing excise tax. Moreover, it is difficult to calculate. With the price of gasoline at UAH 21.50, almost UAH 10 is indirect taxes, which ultimately have to be borne by consumers.
“We understand there is a need to raise the budget funds. But it is also necessary to pay attention to smuggling and counterfeiting, which accounts for one third of the market share, estimated at around UAH 15 billion.”