The American Chamber of Commerce Calls on the Parliament and Government to Reconsider the Introduction of Excise Tax on Sugar-containing Waters

The American Chamber of Commerce in Ukraine (the Chamber) calls on the Verkhovna Rada of Ukraine and the Government to reconsider the introduction of excise tax on water with added sugar or other sweetening or flavoring substances, as the adoption of Draft Law #9032-1 will negatively impact both consumers and the economy.

The key negative consequences include the following:

• Complexity of tax administration and creation of a "black market" for taxable goods. The burden will apply only to bona fide taxpayers who pay all payments and salaries to their employees, use cash registers and issue fiscal checks.
• Increase in taxes on consumer food products will result in shifting the tax burden to the end consumer, as according to preliminary estimates of Chamber Member Companies' experts, 1 liter of sweet drink will rise in price by 15%.
• Not only the soft drinks industry will be affected, but also the sugar industry, which may lead to negative economic consequences related to job losses, development of the black market for excisable goods, liquidation of small businesses in this area, which will slow down the economic recovery of Ukraine.
• Setting the tax rate in euros creates the need to recalculate the tax amount on a daily basis. This is especially true for public catering establishments, which, in addition to reprogramming payment transaction registers, need to constantly check the exchange rate to ensure that it is correctly reflected in the payment documents.
• Theconditions for the introduction of new taxes in the context of Article 7 of the Tax Code of Ukraine areviolated. It is also envisaged that the tax will be included in the list of excisable goods, which means that companies will need to review their plans for operating in Ukraine and investing in projects, as the rate may be revised on a regular basis.
• Theintroduction of the respective tax does not affect the reduction of obesity. Also, selective taxation has not been proven to be an effective tool for changing consumption patterns or promoting healthy eating. Instead, a significant substitution effect was found.

The business community supports the government's desire to minimize the negative impact on the health of the Ukrainian population, but believes that a more effective mechanism to combat increased sugar consumption is a comprehensive public and private information and education policy on healthy lifestyles and balanced nutrition. As a socially responsible business, AmCham member companies are constantly implementing such projects in the communities and regions where they operate.

In view of the above, the Chamber Member Companies call on the Verkhovna Rada of Ukraine and the Government to reconsider the introduction of excise tax on sugar-containing waters and consider the position of the business community and provide clarifications in accordance with the above Draft Law.