The government of Ukraine began to openly throw a barrel at each other because of holes in the budget and the threat of industrial collapse
Kyiv, July 30 (Navigator, Vladimir Mikhailov) – An increase in taxes for the metallurgy of Ukraine will have a short-term effect and in a year will lead to a reduction in payments to the budget due to the crisis in the industry, says the Deputy Minister of Industrial Policy.
Speaking at the round table “Socio-economic consequences of increasing the tax rate on subsoil use for the industry of Ukraine,” Deputy Minister of Industrial Policy Alexander Kalenkov criticized the state’s attitude towards the mining and metallurgical complex of Ukraine.
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“Everyone understands that the hole in the budget needs to be closed by reducing expenses and increasing revenues. The question is how to do it. This is determined by the Ministry of Finance. He probably decided that our tax on mineral resources was not large enough. Unfortunately, I witnessed how this was accepted. I don’t think that the state, represented by the Ministry of Finance, heard the industry,” he said. – There must be a balance here. It is clear that you can milk a cow more and more, but the main thing is that the cow does not die.
An increase in fees for subsoil may lead in the short term to an increase in fees to the budget, but within a year or a year and a half, and maybe faster, revenues to the budget will decrease. Our meth complex will become uncompetitive. Our metallurgists are already working beyond profitability. Miners are on the verge of profitability. Some of these enterprises have already reached the point where they become unprofitable. Prices for metal products and mining raw materials are falling. This trend will continue in the future. Now the surplus of capacity in the world, for the mining and metallurgical complex is several times greater than all the capacities of Ukraine taken together, we have Russia at our side, a very strong regional player, whose gas prices are several times lower than ours. Another competitor is Türkiye, which has built an efficient electrometallurgy.
We will simply be squeezed out, we will be pushed out of the market, but 85% of the products produced go to the foreign market, literally in a year and a half.”
According to the official, the decision to increase fees for subsoil use is a consequence of problems in government administration.
“We analyzed the situation both in April and today. In April, despite the fact that the government declared that fees would double, they actually increased 5 times. Thus, the load on enterprises will increase fivefold. This is with optimistic developments,” says Alexander Kalenkov.
“It could be worse. The fact is that the methodology being developed by the Ministry of Economic Development and Trade is not yet ready. If this technique comes out in a “pessimistic” version for enterprises, the increase will be 8-10 times. If this rate is changed from 5% to 8%, or increased further, the fee will increase by eleven times.
Unfortunately, officials of the same Ministry of Finance, with all due respect to them, do not think about enterprises; they are not very interested in what will happen in a year and a half. They have indicators for today, for which they receive bonuses. If they were responsible for the future and thought what would happen in one and a half to two years, when they would have to allocate this budget without any revenue from the mining and metals industry, the decisions would probably have been made differently.
The position of industrialists is not being heard. First of all, this concerns the Ministry of Finance. This position has always been represented by the Ministry of Industrial Policy. Unfortunately, we do not have a minister of industrial policy; since March it was decided to merge him with the Ministry of Economy, and the Ministry of Economy today does not express the point of view of industry. There is virtually no one at the Cabinet table to appeal to the Ministry of Finance. When the Ministry of Finance talks about increasing payments, there is no one to say what this will lead to, no one to show where enterprises go beyond the boundaries of profitability.”
Like other participants in the round table, Alexander Kalenkov believes that it is impossible to increase payments for enterprises operating in such a market. Metallurgists will not be able to compensate for the drop in profits by raising prices.
“It is impossible to raise prices, this is a very competitive market. Enterprises will be forced out of the global market. One place in industry feeds 10 places in the economy. The main component of the industry is the mining and metals industry. The basis of the competitiveness of our mining and metals industry is access to raw materials and, unfortunately, inexpensive labor, relatively inexpensive. And it is very important that it becomes more and more expensive. Why increase payments? It’s better to increase workers’ salaries,” says the deputy minister.
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