The IMF is waiting for the Ukrainian authorities to fulfill its liabilities on transferring farmers to the general taxation system from January 1, 2016.

"We have a current draft memorandum which is the basis for the second tranche. As it was fairly said, these are the liabilities the government has taken… and one of the liabilities concerns the VAT system in agriculture," IMF Resident Representative for Ukraine Jerome Vacher said at a meeting of the parliamentary committee for agriculture and land relations, which was held on Wednesday.

He said that under the memo, a draft law with the relevant amendments to the Tax Code is to be registered in the parliament by September.

"Agriculture generates 10% of GDP, but from the point of view of tax revenue it generates only 1%, and this is due to the special regime," he said.

Vacher said that given the military conflict in eastern Ukraine and negotiations with creditors on restructuring foreign debt, this step is important for the state.

He also said that tax benefits for farmers have been assessed at UAH 30 billion.

Vacher said Ukrainian farmers compete with countries where agriculture is not subsidized at all, for example, Chile and New Zealand.

Deputy Finance Minister Olena Makeyeva said that its ministry is ready to draw up the targeted subsidy system for farmers.

"It is better to capture the targeted subsidy system in legislation. This is in line with European experience," she said.

First Deputy Agricultural Policy and Food Minister Yaroslav Krasnopolsky has said he is against revoking tax benefits from 2016.

"The transfer to the general taxation system takes away the last support we have," he said.

The ministry insists on retaining tax benefits until 2018, as foreseen in the coalition agreement.