Parliament’s Jan. 16 decision to cancel the value-added tax for local
gas importers was supposed to benefit Naftogaz, the state-owned oil and gas
monopoly. At least that is the official rationale the Cabinet of Ministers gave.
But if Naftogaz does not have to pay 20 percent of VAT, then the state budget faces
the same loss due to a reduction in tax collection, meaning nothing changes in terms
of the budget deficit.
The parliamentary bill that amended the tax code was passed on the same
day that other scandalous laws were adopted that severely limited such freedoms
as speech, assembly and representation. Although many were later revoked, the
Jan. 16 laws were passed without the actual bill being seen by lawmakers,
debated and voted on by a raise of hands.
Finance Ministry official Mykola Chmeruk mentioned that this year’s
budget foresees collecting Hr 2 billion of VAT on gas imports, meaning the budget
deficit will now grow by this amount. Government forecasts the deficit will
reach Hr 59.5 billion this year, while Oleksandr Parashchiy, Concorde Capital’s
head of research, expects it to be higher than the official figure by at least
Hr 25 billion. Whichever number is more accurate, Hr 2 billion now should be