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6.1.2 ​Budget dynamics - specific issues...
Ukraine’s parliament, the Verkhovna Rada, is going to raise the rate for the mineral resource royalty for iron ore mining to 10% from 8%, according to a draft bill on an update of the nation's Tax Code. In the current version of the Code, a 1.1 coefficient is applied to the iron ore mining royalty rate for 2019, and the draft does not appear to remove this provision. Therefore, if the updates to the Tax Code are approved, the rate for the remainder of 2019 will rise to 11% from the current 8.8%. The bill also changes the base for the royalty payment from raw (before enrichment) ore to the price of final products (concentrate, pellets, sinter).
Cigarettes could double and triple in price on Jan. 1, if a tax bill is approved by the Rada​, warns Natalia Bondarenko, spokeswoman for Philip Morris Ukraine. If cigarettes cost as much as $4 a pack, counterfeits and smuggled cigarettes could rise above 1bn packs, more than half of the national market, she predicts. She says the bill would quadruple the tax rate on tobacco-containing products for heating, a technology deemed less harmful to users than smoking. Such a price hike would push many of the half amn Ukrainians who using heating devices back to conventional smoking.
6.1.3​ Budget dynamics - funding
Ukraine plans to place only hryvnia bonds this fall, suspending auctions of the dollar and euro-denominated bonds,​ Yuriy Butsa, the government’s representative for public debt management told ICU’s Ukrainian Financial Forum.
“Our goal in the future is to switch to exclusively hryvnia borrowing in the local market,” he said, noting that half of the funding this year was in hryvnia.
With the government needing only $2bn to get through this year, it will also suspend issuing five-year bonds, he said. Instead, the weekly Tuesday auctions will be for 1-2-3-year bonds.
To sell more hryvnia bonds and to expand the international investor base, the Finance Ministry will offer government bond auctions via Bloomberg's Auction System.
“Improved transparency and investor awareness should have a positive impact on the expansion of the investor base, and increase the share of national currency in the state debt,” Butsa, the Public Debt Commissioner, said in a statement posted on September 27 on the National Bank of Ukraine website.
6.1.4​ Budget dynamics - privatization
Ukraine plans to liquidate over 1,000 inefficient state companies and to sell hundreds more to private investors​, according to the draft of a privatization bill posted on the Rada website. “We will promote the development of the private sector, which is more productive and efficient than the state one,” reads the bill, according to NV.ua. The goal is to reduce the state’s share in the economy to 5% by the end of Zeleneskiy’s term, in 2024.
37​ UKRAINE Country Report​ October 2019 ​ ​www.intellinews.com