Increased excise tax on fuel will cost farmers UAH 14 billion in additional expenses

Ukrainian agrarians are concerned about the increase in the excise tax on fuel and its impact on the cost of agricultural production, the Committee on Agrarian and Land Policy notes.

In particular, the Verkhovna Rada of Ukraine has prepared a draft law on amendments to the Tax Code of Ukraine regarding the implementation of the provisions of the EU law on excise tax (Reg. No. 11256-2), which was developed pursuant to Annex XXVIII to Chapter 4 "Taxation" of Section V "Economic and Sectoral Cooperation" of the Association Agreement and the implementation of the provisions of Council Directive 2003/96/EC of 27.10.2003 on the restructuring of the Community system for the taxation of energy products and electricity.

The draft law provides for a gradual increase in excise taxes on various types of fuel until January 1, 2028. At the final stage, the excise tax on gasoline will be 359 euros per 1000 liters, on diesel fuel - 330 euros per 1000 liters, on liquefied gas - 70 euros per 1000 liters.

The Committee has already been approached by specialized agricultural organizations and associations, which note that the increase in excise taxes on fuel by 2028 will result in additional costs for producers of more than UAH 13 billion annually. Since fuel accounts for up to 10% of the cost of agricultural production, the cost of production and sales of this year's products may increase by several percent due to the fuel factor alone.

Experts estimate that as a result of this increase in fuel excise tax, farmers will pay an additional UAH 5.5 billion in 2025, and an additional UAH 14 billion starting in 2028.

In the context of war, constant terrorist attacks by the enemy, rising costs of inputs, destruction of infrastructure, and power outages, the increase in fuel excise tax will have a negative impact on agricultural production and food security and will significantly weaken the competitiveness of Ukrainian agricultural producers.

Thus, Ukraine is moving step by step towards European integration and is gradually implementing EU legislation. At the same time, the provisions of Directive 2003/96/EC provide for the possibility of establishing special reduced excise tax rates for agricultural machinery used in field cultivation, for which the minimum tax rate is set at EUR 21 per 1000 liters of diesel fuel. This is the rate currently applied, in particular in Romania, while in Poland, farmers receive a full refund of fuel excise tax and do not actually pay it.

In the European Union, agricultural businesses that do not use public roads pay only 50% of the excise tax. In Ukraine, farmers already pay much more than their European counterparts.

In Eastern European countries, such as Lithuania, Latvia, and Romania, the excise tax is no more than 60 euros per thousand liters, while in Ukraine, businesses have to pay 139 euros per thousand liters.

If the excise tax is increased to 330 euros per thousand liters by 2028, Ukrainian businesses will pay 5 times more than European companies.

Thus, the proposed rules of the draft law literally bring Ukrainian agricultural enterprises to their knees and deprive them of the opportunity to compete in the European and international agricultural markets. This will especially affect the increase in the cost of products for Ukrainian consumers.

It is clear that funds are now needed for defense, but Ukrainian associations and organizations have made proposals that the excise tax rate should not exceed 50% after the war is over. This will help businesses and producers plan their operations better.

All proposals and amendments made by members of the Verkhovna Rada Committee on Agrarian and Land Policy to the draft law were not supported.