Ukraine plans to exempt the oil import from value added taxation in 2012-2013 to support oil refineries, who could not withstand the competition with foreign producers in the conditions of the open market. The related draft law was submitted to the Ukrainian Verkhovna Rada (parliament).
The authors of the document - representatives of the ruling Party of Regions - stated that Ukraine's oil refineries had received about 20 million tonnes of oil a year since 2005. This year's crude supplies dropped by almost ten times, as solely the Kremenchug oil refinery is operating.
They are confident that the exemption of the facilities from the 20-percent VAT will make it possible to guarantee oil supplies to the refineries, which are the main employer in a town, as well as to draw foreign currency into the country owing to the hike of export of petroleum products. It is projected a growth of the budget revenues from the taxes on goods and wages.
This week, the government discussed the possibility to impose a tax-free import of ten million tonnes of oil and the necessity to impose import duties on petroleum products.
According to Managing Director of the Dragon Capital Investment Company's Analytical Department Andrei Bespyatov, with due account of the growth of gasoline excise duties, its cost may increase with the imposing of import duties.
"This step may mean an additional price bargain on consumers, owing to whom the country plans to carry out upgrading of oil refineries, mainly those belonging to private owners," he said.
The expert believes that it will be reasonable to analyse the impact of benefits on the budget with the projected level of its deficit and limited possibilities of funding.
In January-May, Ukraine's oil refineries cut gasoline production by 27.4 percent, as compared to the same period of 2011, to 718,000 tonnes. The output of diesel fuel and heating oil almost halved.
Over the first five months of the year, the republic imported 754,000 tonnes of oil, mainly from Russia. The supplies of Russia's crude stopped on March, when the Lisichansky oil refinery was shut down. Presently, Ukraine does not import oil.
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(Originally published June 27, 2012, by ITAR-TASS.)