17:15 19.06.2020

Increase in iron ore royalty amid crisis unacceptable – Metinvest CEO

2 min read
Increase in iron ore royalty amid crisis unacceptable – Metinvest CEO

The Metinvest mining and smelting group considers it untimely and unreasonable to increase the royalty for iron ore extraction, which is contained in the law on improving tax administration (bill No. 1210, after signing law 466).

CEO of Metinvest Yuriy Ryzhenkov said during the group's first virtual press tour at the Illich Iron and Steel Works on Thursday, parliament passed bill No. 1210 as a matter of urgency, forcibly, including because of the fact that the package introduced an international anti-tax standard, the so-called BEPS action plan.

"The adoption of this law opened the way to obtaining financing from the IMF. Of course, this is important for the country. And the mining and metal sector, and Metinvest in particular, support the introduction of important international standards, such as BEPS. And we stand for transparent relations between the state and business. However, along with the introduction of the BEPS standard, strangely enough, the law suddenly passed some provisions that led to a serious increase in royalties for the extraction of iron ore. They increased from 8% to 11-12%, depending on the price of raw materials. This leads to a serious increase in the costs of paying royalties by mining enterprises – more than $ 64 million per year, an increase of more than 40%," the top manager said.

At the same time, he said that the state is once again trying to solve the problem of budget revenues at the expense of the mining and metal sector.

Ryzhenkov added that without the adoption of changes, such legislative initiatives would do great harm to the business environment. Other efforts to create a favorable investment climate are offset. They do not contribute to attracting new investments; on the contrary, they cause an outflow of existing ones and jeopardize the entire production chain in the mining and metal sector.

"Today, many associations, and we, as a company, are calling for a delay in the adoption of the initiatives of bill No. 1210 (law 466) in terms of increasing royalties for the extraction of iron ore. We call for the development of transparent, understandable and market-related methods for establishing royalties that are accepted throughout the world, which we could use in our country. And in the current situation, in our understanding, an increase in the tax burden is unacceptable and can lead to critical consequences for both the industry and the economy," the CEO said.

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