The Cabinet of Ministers has approved the draft amendments to the Tax Code in terms of abolition of the environmental tax factors for disposal of decommissioned vehicles, the Information-Analytical Bulletin of the Cabinet of Ministers of Ukraine informs.

Experts from the Ministry of Revenue and Duties government is seeking to reduce the tax burden on car buyers.

It is assumed that the size of the environmental tax will depend on the cost of services for organization and disposal of a decommissioned vehicle. In this case, the environmental tax rate will be for passenger vehicles – 5,500 UAH, for trucks – 11,000 UAH.

Experts at the Ministry of Revenue say the environmental tax rate is not linked to the engine size, date of manufacture, its mass etc. They believe that such an approach is justified because the recycling tax is not related to the level of hazardous waste generated by the vehicle decommissioning. The objective of this tax should be only collection of funds required to cover costs associated with recycling of vehicles.

The adoption of the proposed changes in the Tax Code will encourage adaptation of the Ukrainian legislation to the EU codes and standards, as the environmental tax is approximately consistent with what is charged for the similar services in the European countries.

It is important to understand that the growing number of motor vehicles in Ukraine started to generate junkyards, which can’t be recycled for lack of funds. The adoption in 2013 of the Law of Ukraine "On disposal of vehicles" is natural and normal step towards resolving this problem.

Moreover, it is absolutely clear that, as in the case with plastic recycling, the car recycling fee should be paid by  the importers or domestic car manufacturers. Except that the fee may have a specific monetary value for importers, but for domestic producers it can be expressed both in money or in a commitment to build special junkyards and recycling plants.

According to Ukrainian Association of Auto Importers, due to abolition of environmental tax factors, the car prices will drop and the car market will be revitalized.

According to AUTO-Consulting, after adoption of the Law "On disposal of vehicles", the used car sales grew on domestic market. According to them, sales increased 60% since 2012.
In 2012 Ukrainian car manufacturers released 76,281 cars and buses, which is down 27.1% from 2011, including 69,687 passenger cars (down 28.6%), 3,359 buses and trolley buses (down 10.1%) and 3,235 trucks and commercial vehicles (down 2.9%).

From 69,685 passenger cars made in Ukraine, 42,755 were supplied to the domestic market in 2012.
In 2012, suppliers of imported cars originated from 66 countries, they supplied nearly 205,000 cars for the total cost of 3.247 billion USD.

In 2012, as in previous years, the major supplier for the Ukrainian car market was Russia – 37,500 vehicles for the customs value of 333.7 million USD. Other than truly Russian brands Lada and UAZ, Russia produced domestically and exported to Ukraine such brands as KIA, Hyundai, Renault, Volkswagen, and Peugeot.

In 2012 the product offering on the passenger car market amounted to 247,700 cars, with increased inventory of 35,200 cars, which was formed at the beginning of 2012, - over 282,000 units.

Ukrautoprom has estimated that in 2012 the effective demand on the primary market of passenger cars reached 243,000 units, causing a transition supply of vehicles intended for sales in 2013 to increase by another 4,669 units.

In particular, in the first 7 months of 2013, 207,700 vehicles were sold and registered on the Ukrainian primary car market, which is up 6% year-on-year. In this case, the number of initial registrations of passenger cars fell by 5%, buses - by 1%. Thus, the overall growth of the market has been formed by increased demand for commercial vehicles, whose sales were up 33% year-on-year.

Share of the new vehicles in total sales on the primary market by types of vehicles is as follows: new passenger cars - 96%, in the commercial sector - only 11%, buses - 56%.

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