The Association of Milk Producers insists on continuing the reform to reduce the value added tax (VAT) rate to 14% for the entire dairy production chain. This will provide businesses with sufficient working conditions and citizens with access to food.
This was emphasized by Volodymyr Andriiets, an analyst at the Association of Milk Producers, during a press conference on June 25 on the need to extend the reduced VAT rate on agricultural products to the final consumer.
The dairy industry of Ukraine has reached a critical state, in which, in addition to subsidy mechanisms, the state needs transparent and affordable support for raw milk producers for a long time - at least 5, and ideally - up to 10 years.
One of these mechanisms is tax reform, according to which the reduction of the value added tax (VAT) rate to 14% was introduced.
The reduction in the rate provides support to raw milk producers in the form of a reduction in working capital, for consumers - reduces the cost of products on store shelves, and on a national scale has a de-shadowing effect.
"Such a reform was originally planned for the entire dairy production chain. Now the first stage has been introduced - reducing the VAT rate to 14% for producers. We can say with confidence that fears of rising prices have not materialized. That is, the reduction of the rate did not affect the cost of products on the shelf, "- said Andriiets.
The Association of Milk Producers insists that the rise in prices for finished products, which has been observed over the past six months, is part of the general rise in prices for consumer goods and services in all categories, including dairy products. And this does not depend on reducing the VAT rate to 14%.
According to the results of 2020, the expenditures of Ukrainian citizens on food products are 47% - a level close to the critical limit of 60% (SSSU data). In European countries and the United States, this figure is 13% and 6%, respectively.
"That is, in Ukraine - the largest agricultural country in Europe - food is inaccessible to its citizens," - says Andriets.
Adhering to the principle of the right to adequate food (Voluntary guidelines in support of the gradual exercise of the right to adequate food, approved by FAO in 2004), the practice of reducing VAT throughout the production chain to the final consumer, especially in food, is applied globally. In particular, the five leading dairy countries in Europe have the following reduced VAT rates: Poland 5%, Germany 7%, France 5.5%, the Netherlands 6%.
In accordance with the Voluntary Guidelines, the first stage has already been completed. However, our opponents want to actually repeal this reform by returning VAT up to 20%.
This will negatively affect the dairy industry as well. As the financial situation of dairy farms is already quite complex, as confirmed by the calculations of FAO economists, who from 2017 calculate the profitability indicator of dairy farms, the so-called conditional milk index (UMI): the first five months of the year were the second least profitable in the history of UMI seasons - it was worse only in the mega-crisis of 2015.
Accordingly, given that the initial position of the Association of Milk Producers was to reduce the VAT rate on the whole chain, we further insist that the reform must be completed. And the reduction of the VAT rate to 14% should be throughout the production chain.
Press service of the Association of Milk Producers