You're reading: Ukraine importers unhappy with new tax designed to stimulate domestic production

National Bank of Ukraine Governor Valeriya Gontareva held a turbulent meeting with members of the American Chamber of Commerce, many of whom are unhappy with a new 5-10 percent tax on imports.

“When there’s not enough foreign currency in the country, the NBU has to implement the administrative restrictions,” she said. “Unfortunately, we made the life for businesses more complicated.”

She advised the business community to build production capacities in Ukraine to avoid dependency on foreign currency needed to buy goods from abroad.

“The country can’t import 70 percent of what it consumes as it is now,” she said. “Finally, we have to start substituting the imports.”

Moreover, licensing for import activity is complicated in Ukraine, another reason to produce domestically. “Even previous versions of iPhones weren’t imported here legitimately,” Gontareva emphasized.

The NBU plans to review all the contracts involving exporting and importing to make sure there’s no money laundering through fictitious schemes.

As of now, the regulator obliges the exporters to sell as much as 75 percent of the foreign currency it receives as revenue. The norm has been effective since September last year, while previously the NBU required 100 percent of the foreign revenue to be transferred into hryvnia.

According to the official data, Ukraine’s imports fell by 28 percent last year, down to $60 billion, while exports shrank by 15 percent, to $64 billion.

Having a $4 billion surplus is a positive sign in terms of macroeconomics, when it happens because of the shifts in the quality of country’s goods that find demand on the global market. However, in Ukraine it occurred because of the heavy devaluation of hryvnia.

“Devaluation of the hryvnia has both positive and negative implications,” Olena Bilan, a macroeconomic expert, wrote in a blog for Novoe Vremya, a weekly. “Up to some point, the positive effect prevailed, but rapid and sharp hryvnia devaluation these days has much more negative than positive.”

She believes the NBU’s restriction measures are a necessity, although “they do not solve the problem of a lack of confidence, though provide a temporary relief to work out a joint plan (on how to get out of the current situation).”

“Time of populism and earning political bonuses with loud phrases is over,” she wrote.

“Looking at the devaluation of the currencies of almost all post-Soviet countries – Ukraine, Russia, Belarus, Moldova, Georgia, Azerbaijan, Kazakhstan – it impresses me how much (Russian President Vladimir) Putin’s sick ambitions made the whole region toxic and brought down the wealth of all its residents,” Hlib Vyshlinsky, a managing director at GfK Ukraine, a market research company, wrote Feb. 24 on Facebook.

Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].