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
tacked on.
“This is a lot of money that was supposed to fill the budget. (On
January 16) this was cancelled. How are they going to close the gap in the
budget?” said Oleksiy Kucherenko, former Housing and Utilities Minister.
Naftogaz is not the only Ukrainian gas importer. Ostchem Holding,
billionaire Dmytro Firtash’s chemical umbrella company within his Group DF, purchases
gas directly from Russia too, while Donetsk tycoon Rinat Akmetov’s DTEK and
young oligarch Sergiy Kurchenko’s VETEK re-imported Russian gas from Europe in
2013.
Thus the law passed by the Verkhovna Rada obviously benefits these companies
since Ostchem continues to import gas from Russia with VETEK willing to start
doing the same.
Many of Ukraine’s richest businessmen are in or close to the ruling
Party of Regions. Firtash has been known to do business with Sergiy Lyovochkin,
the president’s former chief-of-staff. Akhmetov spent six years in parliament
as a member of the Regions Party faction, though he skipped most of the
sessions. And Kurchenko is considered to be close to Oleksandr Yanukovych, a
trained dentist worth more than $500 million and the president’s eldest son.
Last year Ukraine imported 27.6 billion cubic meters of gas from Russia,
of which Ostchem bought 12.0 billion cubic meters, signifying a 15.1 percent drop
from 2012. The price paid was rather high – $11 billion, which is $399 per
1,000 cubic meters on average, one of the highest prices in Europe. On Dec. 17,
President Viktor Yanukovych and Russia’s leader Vladimir Putin agreed to a gas
price discount, and since the beginning of 2014 Ukraine has had a gas price tag
of $268.5 per 1,000 cubic meters. This year the country’s gas import will reach
33-35 billion cubic meters, according to Minister of Energy and Coal Industry
Eduard Stavitsky.
After receiving a significant gas price discount from Russia, government
officials speculated a lot about the positive aspects of the agreement. Former
Prime Minister Azarov called this an event of historical significance. But
conglomerates controlled by businessmen affiliated with the Party of Regions
appear to be the major and, perhaps even the only beneficiaries of that deal –
as well as of the gas imports VAT
cancellation.
Kyiv Post associate business editor Ivan Verstyuk can
be reached at [email protected]
