10:53 03.06.2020

FEU urges president to amend tax administration law to reduce iron ore royalties amid crisis in mining industry

3 min read
FEU urges president to amend tax administration law to reduce iron ore royalties amid crisis in mining industry

The Federation of Employers of Ukraine (FEU) has urged the country's leadership to promptly make the necessary amendments to the law on improving tax administration (bill No.1210 and No. 466 after its signing), taking into account business proposals and not increase iron ore production royalty payments by 1.5 times amid the crisis in the mining and metallurgical complex.

"An increase in the royalties will lead to cost increase of iron ore in the domestic market and the ultimate loss of competitiveness by Ukrainian metallurgists," Director General of the Federation of Employers of Ukraine Ruslan Illichov said in a letter, which he sent to President Volodymyr Zelensky on Tuesday, June 2.

In an appeal to the head of state, a copy of which was seen by Interfax-Ukraine, it is stated that since the second half of 2019, domestic metallurgy has been in deep crisis because of difficulties with the sale of products on markets, as well as because of coronavirus (COVID-19) disease. In 2019, steel production fell to 21 million tonnes of steel, which was a record low in the history of independent Ukraine, and in 2020 the situation became even more complicated, the federation said in the document.

The Federation of Employers of Ukraine said that in April 2020, the drop in steel production in Ukraine amounted to 31% compared with April 2019. The Dniprovsky Steel Works completely halted, while production fell by almost 40% at Azovstal and Interpipe Steel, and by 35% at Zaporizhstal in April 2020. The net loss of metallurgists amounted to about UAH 14 billion in the first quarter of 2020.

Illichov said that the law also imposes an excise tax on all base and motor oils, which will lead to cost increase of these products by 47% and make it difficult to import them.

According to the federation's head, the impact of introducing the law will be negative, namely, a decrease in budget receipts, low export volumes and FX earnings, as well as a possible suspension of work of enterprises and unemployment.

"The authorities promised the business community that all the problematic issues of law No. 466 will be resolved and no business will suffer. Ten days have passed since the law was signed by the president, but the business does not see any actions on the part of the authorities in this segment," the federation said in the letter.

According to the federation's head, there is still the opportunity to change the situation for the better, but it is necessary to act very quickly and make a comprehensive decision, that is, within two weeks to collect and adopt all the regulations that worsen the business activities in Ukraine. "Delay can be very expensive and have disastrous consequences for the economy of Ukraine," the federation said in the letter.

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