22 February 2008, 16:29
The Bill (Reg.No.1456) seeks to change the mechanisms for collecting Environmental Pollution charges, together with Income Tax from businesses, and Value-Added Tax (VAT) paid by mining and smelting businesses, and merchant-coke industrial complexes.
The Bill envisages that the Pollution charges will remain at the disposal of businesses, and used by them towards nature protection and preservation. 50% of the Income Tax shall be transferred to a special account within the State Treasury bodies, towards the organisation and launching of regional nature protection programmes (this exemption shall be introduced for an indefinite period of time). Until 1 January 2012, 50% of the VAT which has to be paid to the Budget, shall be transferred to a special account within the relevant Local Governments, to be used exclusively towards the funding of nature protection schemes, launching of up-to-date processes and equipment, and reducing contamination emissions.
The Committee shares the Sponsors´ concerns, resulting from the need to improve the environmental situation in localities where the said businesses and their divisions operate. At the same time, its members feel that ‘dispersion´ of taxes between businesses is an inefficient method of their support; it is non-transparent as regards the administration of taxes, and discriminates against other taxpayers´.
Changes in the mechanism for tax receipts, emphasised S. Teriokhin, Committee Chairman, ‘affect the Budget Revenues, resulting in an unbalanced Budget system in Ukraine´.
The Committee noted that a similar experiment had previously been conducted from 1 July 1999 1 January 2002, pursuant to the Law ‘On Economic Experiments at Businesses within the Mining and Smelting Complex of Ukraine´. Nevertheless, the Explanatory Note provides no evidence of the effective use of funds from the environmental pollution charges remaining at the disposal of businesses, as well as from the reduced tax burden resulting from a 50 percent decrease in charges paid to the State Innovation Fund, complete exemption from charges paid towards construction, reconstruction, repair and maintenance of general purpose roads, reduced Income Tax and certain VAT benefits.
S. Teriokhin stressed that granting additional benefits to specific businesses ‘in fact means that they are given monies which will not be received by the State Budget. It is impossible to control their usage for the intended purpose as no such mechanism, or a mechanism for the evaluation of economic benefits resulting from the granting of tax benefits, is available´.
Pursuant to the Law ‘On Environmental Protection´, and the Law on the State Budget of Ukraine for the current year, charges for environmental pollution are attributed to the revenues of special funds within the State and Local Budgets, used towards funding of environmental schemes.
Throughout the period from 2002 - 2007, the estimated revenues of the Special Fund within the State Budget of Ukraine from the said charges have grown from UAH 59,100,000 in 2002 to UAH 931,600,000 in 2008. The Committee thus feel that ‘growing revenues from the charges at issue testify to the feasibility of forwarding a portion of these monies towards the financing of environmental measures´.
The People´s Deputies stressed that they ‘have every reason to review legislative provisions related to taxation of large businesses that are polluting the environment, drawing on current practices for collecting and administrating the existent inefficient charge for environmental pollution´.
Committee members noted that the Bill affects directly the receipts to the State Budget, since 50 percent of the Income Tax and 50 percent of Value-Added Tax are forwarded to Special Accounts, which is in conflict with the Budget Code of Ukraine. However, the Explanatory Note envisages increased Budget receipts totalling UAH 200,000,000 in Income Taxes, resulting from the implementation of Environmental measures.
In the outcome of these deliberations, S. Teriokhin noted that ‘The Committee considers there are insufficient grounds to uphold the Bill at issue´.