14 September 2020, 12:02
Will Ukrainians get cheaper milk and dairy products?
#AtTheCommitteeConsideration section today is about the draft law No.
3775, which proposes to reduce the value added tax for milk and dairy
products.
2019 according to the State Statistics Service was the first year, when
the dairy industry of Ukraine demonstrated a record decline: milk
production fell to 9.69 million tons or 3.7%. Ukrainian processors did
not receive 377.1 thousand tons of raw materials. About 30% of milk
processing enterprises in 2019 worked at a loss.
What is the reason?
The main reason is the reduction in the number of dairy cows. Experts
of the Association of Dairy Producers of Ukraine claim that Ukrainian
farmers are disappointed with the state policy in agriculture, many of
them are considering closing the dairy business. It is not profitable,
they say, due to the unclear situation with the introduction of the
land market, incomplete payments in state support programs, as well as
significant reduction of such programs in 2020. This leads to the
monopolization of the raw material market and the establishment of high
purchase prices for milk, - experts say.
The authors of the draft law No. 3775 claim that out of 27 EU member
states, the prices for raw milk in 26 countries are lower than in
Ukraine. Therefore, due to the high cost of raw milk, prices for dairy
products in Ukraine are higher than in the EU. “From an export-oriented
dairy industry Ukraine is becoming import-dependent”, - the authors of
the draft law say. Last year, exports decreased by $ 45 million
compared to 2018, while imports increased 1.5 times, by $ 46 million.
Prices for imported dairy products are sometimes lower, than prices for
products from domestic producers. As the result, dairy products from
the EU countries, like Poland, Germany, France, the Netherlands, Italy,
as well as from Belarus, where raw materials are much cheaper than
Ukrainian, is gradually displacing Ukrainian dairy products in the
market.
Experts of the Association of Milk Producers of Ukraine claim that one
of the reasons for high prices for dairy products in the domestic
market is the high VAT rate on milk products — in Ukraine it is as much
as 20%, while in European countries the VAT rate is several times
lower. In Germany, for example, it is only 7%, in France even less —
5.5%, in the Netherlands — 6%, in Hungary — 9%, Poland — 5% and even in
Belarus and Russia — 10%.
What does the draft law No. 3775
propose?
The draft law proposes to amend the Tax Code of Ukraine, in particular,
to reduce the VAT rate to 10% on dairy products and raw materials for
their production:
- butter;
- milk and cream;
- milk and cream, condensed and with added sugar or
other sweetener;
- buttermilk, coagulated milk and cream, yoghurt,
sour cream and other fermented milk and cream;
- whey;
- products consisting of natural components of milk;
- cheeses of all kinds and sour milk cheese.
The authors of the draft claim that it will help to prevent the decline
in dairy farming and milk production. It will also boost milk and dairy
products production and keep prices at a reasonable level.
The Committee will announce its opinion on draft law No. 3775 at its
next meeting on September 16, 2020.