8 JUL 98
FM AMEMBASSY KIEV
1. ACCORDING TO PRESS REPORTS, ON JULY 2 THE PRESIDENTIAL ADMINISTRATION DRAFTED A DECREE CUTTING VAT FROM 20 PERCENT TO 18 PERCENT, AND ON JULY 6, PRESIDENT KUCHMA SIGNED ONE DECREE REGULATING PENSION PAYMENTS AND ANOTHER DECREE EXEMPTING HUMANITARIAN AID FROM TAXES. FOLLOWING ARE SUMMARIES OF THOSE DECREES.
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DRAFT DECREE ON CUTS IN THE VAT
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2. ON JUNE 2 THE PRESIDENTIAL ADMINISTRATION DRAFTED A PRESIDENTIAL DECREE CUTTING THE VAT RATE FROM 20 PERCENT TO 18 PERCENT AND PROVIDING SOME CHANGES IN ITS CALCULATION AND PAYMENT BEGINNING JULY 1, 1998. THE DECREE WOULD ALSO ELIMINATE EXISTING EXEMPTIONS ON VAT FOR EDUCATIONAL SERVICES, PHARMACEUTICAL AND MEDICAL PRODUCT SALES, IN-TOWN LOCAL TRANSPORTATION SERVICES, AND IMPORTED CRITICAL PRODUCTS. THERE WOULD BE NO VAT EXEMPTIONS ON IMPORTED GAS STARTING JULY 1, 1998. (NOTE: THE EMBASSY HAD BEEN TOLD BY IMP SOURCES THAT THE PLANNED REDUCTION IN VAT TO 18 PERCENT MIGHT BE DELAYED UNTIL 1999, AT WHICH TIME VAT ON NATURAL GAS IMPORTS WOULD BE RAISED. END NOTE.)
3. THE DRAFT DECREE WOULD PROVIDE A MORATORIUM UNTIL JANUARY 1, 2000 ON PARLIAMENTARY CHANGES AND AMENDMENTS TO LEGISLATIVE ACTS SETTING VAT BENEFITS. COMMENTING ON THE NEW DRAFT DECREE, THE PRESIDENT OF THE UKRAINIAN UNION OF INDUSTRIALISTS AND ENTREPRENEURS (UUIE) AGREED THAT THE MECHANISM FOR CALCULATING VAT NEEDED TO BE CHANGED, RATES LOWERED AND BENEFITS ELIMINATED. HOWEVER, THE UUIE PROPOSED THAT PRESIDENT KUCHMA CONSIDER ITS OWN DRAFT AMENDMENT TO THE VAT LAW WHICH WOULD LOWER THE VAT RATE DOWN TO 15 PERCENT BEGINNING JANUARY 1, 1999.
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DECREES ON PENSIONS AND HUMANITARIAN AID
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4. ON JULY 6, PRESIDENT KUCHMA SIGNED TWO DECREES: ONE REGULATING THE PAYMENT OF PENSIONS, AND ONE EXEMPTING HUMANITARIAN AID FROM VAT. IN THE FIRST, PENSION PAYMENTS FROM THE PENSION FUND WILL BE DONE THROUGH THE PERSONAL ACCOUNTS OF PENSIONERS AND RECIPIENTS OF STATE SUBSIDIES BEQINNINQ SEPTEMBER 1, 1998. THE SECOND DECREE EXEMPTS ALL HUMANITARIAN AID FROM TAXES (EXCEPT EXCISE DUTY). A GOVERNMENT COMMISSION WILL CONTROL THE AMOUNT OF AID AND ITS RECEIPT, DISTRIBUTION AND ACCOUNTING. IN THE EVENT THAT AID WOULD BE DELIVERED IN PURSUIT OF ANY PROFIT, IT WOULD BE REGISTERED AS PROFIT AND BECOME TAXABLE.
This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)