Ministry of Agrarian Policy and Food defends tax breaks in agricultural sector

Easing taxation is a powerful tool to support to local agrarians, according to the Ministry of Agrarian Policy and Food, which advocates preserving tax benefits for several sectors in Ukraine's agro-industrial complex (AIC), the Information-analytical Bulletin of the Cabinet of Ministers of Ukraine informs.

"The ministry defends preservation of the existing tax incentives for development of AIC. Agriculture can not be subject to general taxation. After all, tax benefits for the industry represent the indirect state support encouraging agrarians. Therefore, the ministry will defend preservation of existing tax regimes and the emphasis on deeper review of the issue with other ministries," Minister of Agrarian Policy and Food Mykola Prisyazhnyuk said on the occasion of the second All-Ukrainian Agrarian Forum.

The livestock sector has become the main beneficiary of special taxation. Tax breaks brought the sector back to prosperity, and livestock producers would be the first to suffer if government rejects the policy of tax incentives for AIC development. In this regard, the ministry has proposed to direct some funds from VAT accumulation to the livestock industry.

The ministry suggests direct 30% of the accumulated funds (from VAT payments by manufacturers) for development of livestock sector. While keeping the current regime of VAT accumulation, it will ensure the target allocation of up to 5 billion UAH for development of livestock industry.

Experts say state support of agriculture is a common practice in developed countries. Moreover, it is considered that agricultural sector is incapable of self-regulation. The role of government in this aspect is becoming increasingly significant. In fact, government must ensure its food security. The EU utilizes the special "Common Agricultural Policy" (CAP) – a system of agricultural subsidies and programs of agricultural development in the EU. The CAP includes direct payments in the form of subsidies, price support mechanisms (with guarantees of minimum price), and quotas on certain goods from beyond the European Union. In 2011, the cost of CAP implementation exceeded 40% of the EU budget (about 55 billion Euros), 31% of which was a direct aid to agricultural producers and 11% – for development programs. For comparison, the analysts note that, in 2012, Ministry of Agrarian Policy and Food of Ukraine allocated over 822 million UAH from general fund of state budget for implementation of program "Financial Support of Activities in Agro-Industrial Sector".