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Ukraine’s parliament backs end to VAT rebate, lobbying moves to president

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After a protracted legislative process, Ukraine’s parliament voted to adopt draft bill number 7403-d Tuesday, moving to abolish the VAT rebate on exports of soybean and rapeseed, market sources told Agricensus.

A last-ditch attempt to persuade President Petro Poroshenko to veto the bill is now underway, with industry groups 

“Yesterday our parliament adopted law draft 7403-d,” the Ukrainian Grain Association’s Sergii Ivaschenko told Agricensus.

“That law we do not support, so UGA have already sent a letter to President Poroshenko asking him to not sign such a law,” he said.

A debate on the proposal, and a rival draft bill number 7403-2 which reset the rebate, was initially expected to take place on May 17, but a packed legislative programme meant the topic could not be tackled at the time.

A total of 249 deputies voted in favour of 7403-d from the 423 sitting deputies, with the bill now moving to President Poroshenko for final approval.

Of the 249 that voted in favour of the bill, 85 were from Poroshenko’s own party and 61 belonged to the People’s Front.

Ukraine’s parliament has a total of 450 seats, but 28 are currently left vacant as they represent Crimea and the Donbass.

Domestic crushing

Bill 7403-d repeals the rebate on VAT that is offered to exporters of oilseeds in their natural form and is designed to encourage raw materials to flow into the country’s crushing industry, rather than out to the export markets.

However, the proposal met with a storm of criticism, forcing a modification that dropped the proposal completely from the country’s vast sunflower seed export market and delaying the imposition of the rebate abolition for rapeseed and soybeans.

The industry fears that the loss of the VAT rebate will see exporters look to recoup money further upstream and will likely expose farmers to greater financial pressures.

“A move like this will impact the farmers… There isn’t the crush capacity available so the seed will be exported, the trader will not get his VAT so he will expect someone else to pay for it,” one market source said at the time the proposals were first introduced.

That in turn may see them move away from planting rapeseed and soybeans with the USDA writing earlier this month that they expected 2018/19 soybean production to fall 14% to 3.3 million mt ahead of the September rebate abolition’s event horizon.

If realised, that fall would see Ukraine’s soybean exports drop to 1.65 million mt and would likely see an increase in corn and sunflower plantings.

With rapeseed facing a longer timeline ahead of any rebate discontinuation, plantings are expected to increase in the 2018/19 season, taking production to 2.67 million mt.

UGA president Nikolay Gorbachov said in a press release that the bill “creates discriminatory conditions for the activities of market participants,” and contravenes the rules Ukraine accepted when it joined the WTO and when it signed the Association Agreement with the EU.

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