Before the end of the year, Peoples’ Deputies will gather in the Verkhovna Rada of Ukraine 16 times. During this time, many bills need to be adopted, including next year's budget. For the last months of 2020, many agriculture issues are accumulated, and a lot of them have already became urgent. UAC Deputy Chairman Mykhailo Sokolov spoke to Agravery.com about open questions.

Minagro's recovery is delayed. Although more than once the country's leadership told us about importance of its returning as soon as possible. Why does the process not move?

I can't say exactly what is hindering this process. Although the government became more communicative than before. But this part of the negotiations, for unknown reasons, remains closed to us. Therefore, we can only talk about assumptions based on observations of the situation. One of the reasons is the difficulties in voting in the parliament. You may have noticed that recently, in the Verkhovna Rada, voting is not in a "turbo mode". From a number of laws, we are faced with the fact that the majority does not have that unity. Some People's Deputies began to oppose even those agricultural laws that are extremely necessary. In such situations, it is clear who defends their business interests. For example, the situation around the postponement of the bill №2289 consideration. It allows the import of PPE samples to Ukraine for public research, even if they are not registered in the country of origin. The document allows us not to wait until the country will test them. We can do the same thing and determine if we need these species. I also notice that the corresponding researches cannot be carried out in the country-manufacturer if the corresponding specie is intended for natural and climatic conditions that are different from others.

There is no such an embargo in our country regarding innovative agriculture chemistry in any country of the world. An obvious bill that needs to be adopted. Now we have a whole group in the “Servant of the People” that oppose him now. This case is not an isolated one and it is an illustration of the fact that there is no former unity. As for me, the question is: is the council ready to vote now to restore the Ministry of Agriculture? I think that any process in this direction will immediately create many questions, such as who should be the Minister? It can make the current situation worse.

What problems have already become confirmed without the Ministry of Agrarian Policy, which should be expected in the future?

I do not want to say bad things about the work of the Ministry of Economic Development, because the Ministry and responsible for the agricultural sector Deputy Ministers work no worse, and maybe even better, than it was before. A simple example: we do not see abuses in the distribution of state support funds in 2019 and 2020. Unlike previous years, there are no stories where two companies receive half of the money of state support, or one company receives billions out of four billion of the total.

We also see greater communication in the work of the ministry. Maybe the reason is in the coronavirus that moved almost all the meetings to Zoom program. Nevertheless, I believe that Taras Vysotskyi managed to make the process open. During the discussion of any issue, everyone can participate and make suggestions. Moreover, they are heard, they are discussed objectively. From the negative one - it is clear that when you have a separate ministry, it has more opportunities to protect and lobby the interests of the industry, at the level of the Cabinet and at the level of international relations. When we talk to other countries, it is important for us to be represented by a Minister.

As for the protection of the interests of farmers at the Cabinet level. We see that there are several issues that needed to be resolved, but this was not done. In addition, this is exactly the level where the Minister of Agriculture had to work. Example? The situation with the loss of 380 thousand hectares of winter crops, and only 300 thousand of them were lost in the Odessa region. It was clear in the spring that the farms of the whole area (Bessarabia) were in critical situation. The state did not react in time. Now, we need extraordinary measures to save the local farms. State support is already needed, farmers need to pay, they will not be able to do it without help. Moreover, their bankruptcy will have very serious negative consequences, from the social sector to the economy one. If they do not pay salaries, if they do not pay rent for shares, the PIT will not go to local budgets, and local budgets are formed by more than 60% at the expense of PIT. How will local budgets make ends meet after that? What will happen to these shareholders? What will happen next year: how to restore agriculture there? In this situation, there will be a cascading effect.

The government must think about how to stabilize the economy and the social sector. The proposal is from our side: give a support at least in the amount of those taxes and rents to shareholders. The problem is that we do not have a minister who could defend this issue in the Cabinet of Ministers and demand the Ministry of Finance or the Prime Minister to give this money. I would like to draw your attention to the fact that even the President said that this issue should be resolved, but nothing happened. It is clear that we do not have enough money, it is clear that the country is in a difficult situation, but there are sectors that are still funded. It is impossible to say that the Ministry of Economy is not doing nothing, now work is underway on a bill on agricultural insurance, it will solve the problem in the future. From the point of view of the possibility of solving the problem "here and now" - obviously, they cannot do it.

Why, for example, it is not possible to redistribute unused funds that are in state support?

We also do not understand why. In the spring, when the problem was only gaining momentum, we analyzed and showed how it could be done legally, so that part of the funds that go to the program "Financial support for farmers" went to losses compensation. Then, including, in the agricultural committee we were told, “let us still take this money from farmers, let us try to get this money from the state budget. As a result, neither one nor the other happened.

Why, according to the infrequent phenomenon for Ukraine, such as tax reduction, there have been critics of the law, who reduces the VAT rate from 20 to 14% on certain agricultural products?

There is no direct reduction of the tax in the bill, there is no reduction of the sums which will be paid to the budget. The document is about VAT rate on the sale of raw materials lowering, production that is not sold to the end-use consumer. When the products are processed and sold to the end-use consumer, there will already be a full tax rate. In addition, the amount of fees depends on the rate which is used in the sale to the end-use consumer. In our country, people can't understand it in any way, but VAT is really paid by the end-use consumer. And in the production chain they only hold it in their hands. The chain participant is forced to lend to the budget, and it is important for understanding this bill. What is the point? When we reduce this rate, the amount we lend to the budget decreases. People, who worked in a special regime, when VAT remained with them, they used to think that their price is the price with VAT, when in reality their value is the price without VAT. The VAT received by them on the sale of products must be paid either to contractors or to the state.

Why is it important to reduce this amount, for which we credit the budget, selling agricultural products? It is very simple, because money in Ukraine is expensive without it. We reduce the burden on business. It is not billions, but it is something that can be done without cutting budget revenues. In addition, in the case of delayed VAT refunds on exports, the amount owed by the state will not be so big for the manufacturer.

There is one group of companies, which is in opposition to this law, and it is logical for them. This group includes manufacturers who have outlined large investment projects for the next year. Accordingly, it was expected that the amount of liabilities that they will receive from the sale of agricultural products, would cover their tax credit, even taking into account the investments made. Now, if rates fall, it will not happen, it will form a negative VAT. Accordingly, they will have to wait for reimbursement, which is unpleasant. It can really hurt them, it is impossible to deny. At the same time, we have specifically studied this point - as are the quantitative measurement of VAT on investment and VAT on exports - a ratio of about 20 to 1. That is, VAT on exports is 20 times higher. Therefore, there will be far fewer losers than winners.

I would like to add that at the initiative of UAC, Peoples’ Deputies have submitted amendments proposing to reduce the rate to 14% on a certain list of final food products. This is a dairy group, meat and sugar. If these amendments are adopted, it will lead to a strong impact on the market, to lower prices for the final consumer. As a result, demand will rise. It will also hit illegal producers. According to FAO’s information, 40% of our dairy products are sold "for cash". They are not taxed, they work illegally. And the higher the VAT rate, the more illegal producers win. Therefore, lowering the VAT rate will shift the market balance in favor of legal producers. Therefore, lowering the VAT rate on certain types of food will bring some budget losses. But our logic is the following - what the citizens of Ukraine will gain will lose the budget. And the first to feel this are the socially vulnerable, whose food expenditures account for the lion's share, and their support is a constitutional state duty. This is what we need to ensure that people have the opportunity to buy these goods. In fact, in most countries where there is VAT, the rate is reduced on everyday food.

The norms of the new law on cooperation will come into force on November 15. How will this affect the development of cooperatives in Ukraine? Tell us about the strengths and weaknesses of the law.

We adopted a law that, for example, Lithuania was adopted 20 years ago. Subsequently, for 10 years in this country, the turnover of cooperatives has grown 10 times. I emphasize - not immediately. It must be understood that this law creates the conditions for growth. These rules apply in the EU, the United States, Canada, etc. It does not mean that our cooperatives will start growing like mushrooms, but at least they will be able to do this. Because in fact their creation was impossible before. Therefore, we do not expect that next year we will be on a par with France, where 60% of agricultural products are sold through cooperatives. Now we have this figure less than one percent. We expect cooperatives that are already operating to have a simpler operating model, which is what they have been pushing for.

If you and I carefully analyze who was in favour and who was against, we will see that the law on cooperatives was advocated by working associations of producers who had real turnover. It was opposed by those who wanted to receive state support, but almost did not carry out activities.

Following this law, we need to bring order to the taxation of cooperatives. We are currently preparing appropriate amendments; will we seek their support by the tax committee? We have already taken the first step in this direction, because in the law on cooperation the terminology is unified with the terminology used in countries where the cooperative movement actually works. And if their patronage dividends are taxed not at the level of the cooperative, but at the level of the recipient, then we will come to the tax committee and say - you have to do the same thing, if you want the cooperative to develop. When we manage to do this, it will be even easier for cooperatives to work.

Today, these patronage dividends need to be taxed at the cooperative level and then paid to farmers. If the amendments that we propose to the tax code are approved, patronage dividends will be sent to farmers without taxation at the cooperative level. If a farmer has a loss, the loss will be paid first, and only the balance of the profit will be taxed. If the farmer is in group 4, he will pay only his fixed tax in the prescribed manner.

Recently, because of a dry year, the government has been talking a lot about the development of irrigation system. Where to start reforming? When to expect results?

Now we have substantial reasons to believe that the reform in this area will be implemented. We work in this direction with the State Water Agency, the Ministry of Ecology and the Ministry of Economic Development. We see full mutual understanding and a constructive approach to work with relevant drafts of the bills. The idea of ​​reform consists of two parts. First of all, to transfer pumping stations and distribution channels from the property of the State Water Agency to the Water Users Association (WUA). The problem is that the State Water Agency is not a business enterprise, and performs only the functions assigned to it. The state here, of course, is inefficient, not to mention attracting investment for development. At that time, farmers are interested in making everything like clockwork. Anyone who directly uses water is ready to invest there. The same scheme of water using infrastructure for the field irrigation is used in many countries around the world, and the creation of WUA is in the recommendations of the World Bank.

The procedure looks like that. A WUA is created. This association balances the entire water supply system, including the pumping station. They set the tariff themselves, they put the sums for development: repair of pipes, pumps. As a result, they get lower water loss, they get lower electricity costs and, accordingly, they reduce the tariff for themselves. Now, together with the ministries, we are completing the relevant bill.

Another part of the reform. There were 2.5 million hectares of irrigated fields in Ukraine in a time of Soviet Union. Now there are 500 thousand hectares. So, most of the infrastructure is just destroyed. Of course, there are no water users on these lands. Accordingly, for those who do not have a water supply infrastructure at all, we prescribe the conditions for the creation of private networks and provide an opportunity to properly register ownership of them. At the same time, we want to protect farmers at the level of the law, on whose land networks will be created, so than they are not blackmailed by setting inadequate tariffs. We prescribe a procedure according to which it is necessary to agree with the majority of land users on the territories of which the water will flow, on what conditions it will take place, what will be the tariff. Then you need to sign a contract. And only after that to begin the work. Such a procedure is necessary in order to have market and transparent conditions.

Next, you need to deal with the management of canals, the main pumping stations, the main canals. They must remain in the state because it is a monopoly. But they cannot be left to those who are not interested to earn. Most likely, they will have to be transferred to the management of the company, such as “Naftogaz”. And the tariff for its services will be set by the regulator.

The first stage of land market reform will start in Ukraine next year. Is Ukraine ready for it, from the point of view of normative legal acts. Are farmers ready?

It is clear that now are unfavorable times for farmers and for the country. On the other hand, the law does not allow foreigners to buy land, the first two years it can be bought only by individuals and a limited number of areas in one hand. That means, buying by oligarchs is as complicated as possible.

It will definitely be difficult for the agricultural sector. It is very likely that the introduction of the land market will harm small farmers. There is a great risk that such farms will be in a situation where they will not be able to buy land at all. It does not mean that it will be easy for medium or large companies.

It is possible that some citizens will come to the agricultural sector - people who have money and they do not know where to invest it. They will gladly buy the land and will let it out. What will it lead to? To the rent increase. The government certainly has the tools to mitigate the negative consequences: this is the Credit Guarantee Fund - a law that wasn’t adopted and now will be submitted again, this is the launch of agricultural insurance subsidies, this is the law on portfolio guarantees. In fact, there is a wide range of measures, which, in general, is aimed at facilitating the access of farmers to loans to buy a land, and, what is the most important, that rates on these loans can be low. In this case, the loan payment may be lower than the rent is. Will the government be able to cope with the obvious crisis and the difficult economic situation in general? The question is rhetorical. If it fails, those who insist that the land market cannot be opened now will be right.

Farmers over the past 5 years have repeatedly, with varying degrees of success, reflected the artificial rise prices for fertilizers. Did the monopolists abandon these attempts?

We had an attempt by “OstChem” to introduce quotas for the fertilizers supply from all over the world. The argument was that Russian fertilizers allegedly flow through third countries. This is, to put it mildly, ridiculous, because it is unprofitable to carry fertilizer in circles and repack it. And secondly, in the countries that import the most fertilizers to Ukraine, there is a strict system of control over the country of origin of chemical production. Chemists also claimed that imports are growing, which, in turn, threatens our enterprises. This is also not true, because the largest importer of fertilizers, Russia, no longer supplies us with these products, and its place has been taken by importers from other countries. As a result, imports from these countries increased, while total imports did not. Instead, production at “OstChem” factories increased, in part due to gas that became cheaper.

That situation was like a comedy. Firtash's companies shouted that they were in crisis, but their production grew by 40% for two years in a row. We said: "We also want such a crisis." As a result, they thought that the ministry would listen to them. They probably tried hard and did a lot for it. However, the ministry refused them. They went to court with a claim to declare the commission's decision illegal and demand for quotas introduction. Knowing that our courts are “the fairest” courts in the world, we look at this case with great concern.

Despite this, the fertilizer market is working, and we have the embargo on Russian fertilizers. I would not call deliveries from other countries large. “Ostchem” is forced to sell fertilizers at more or less adequate prices. And no one talks about the deficit in the market. The only thing is that we would like to abolish the duty that applies to Turkey and other non-EU countries in order to completely equalize this field.