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Ukraine revs tax engine in car trade war with Russia

Author: Reuters All articles by this author

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Sep. 04, 2012 10:02
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"If we, too, introduce a certain utilisation fee, then the Russian cars coming to our market will become $1,000 more expensive and Ukrainians will not buy them," Interfax news agency quoted Prime Minister Mykola Azarov as saying on Monday.
Photo by ww.kmu.gov.ua

Ukraine is preparing to introduce a new tax on car imports in response to a similar move by Russia, the Kyiv government said on Monday, in what could become yet another trade war between the ex-Soviet neighbours. 

Russia, which must cut import duties on cars after joining the World Trade Organisation, this month introduced a so-called utilisation fee which analysts say aims to compensate domestic producers for the lower customs duty and protect them.

However, Ukrainian producers say the move will effectively raise import duties and add $600 to $20,000 to the price of Ukrainian vehicles sold in Russia.

"If we, too, introduce a certain utilisation fee, then the Russian cars coming to our market will become $1,000 more expensive and Ukrainians will not buy them," Interfax news agency quoted Prime Minister Mykola Azarov as saying on Monday.

Ukraine's Environment and Natural Resources Ministry has already drafted a bill introducing such fees, a spokeswoman for the ministry said.

Russia, which bought $344 million worth of Ukrainian cars, buses and trucks last year, accounts for 90 percent of Ukrainian car exports and 40 percent of its total output.

Ukraine, in turn, bought Russian-produced vehicles worth a total of $453 million last year.

The two neighbours have already fought a "cheese war" this year when Russia banned imports of cheese made by a number of Ukrainian producers, accusing them of using cheap ingredients such as palm oil in place of milk fats.

Russia has also long urged Ukraine to join its post-Soviet customs union, which includes Belarus and Kazakhstan, offering perks such as cheaper energy supplies and improved market access, but Kiev has so far refused to do so. 

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