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Changes in distribution of sugar imports quotas to make importers dependent on Derzhkomreserv or Agrarian Fund

Kyiv. November 23, 2010

The changes offered by the Ministry of Economy to the Procedure of the Establishing Tariff Rate Quota to Import Raw Cane Sugar to Ukraine make imports directly dependent on the State Committee on the State Material Reserve and Agrarian Fund, said Associate of Volkov and Partners Law Firm Iryna Polovets to the Interfax-Ukraine Agency, commenting on the draft order of the Cabinet of Ministers of Ukraine prescribing changes to the specified Procedure.
"Currently, import of raw cane sugar to Ukraine is allowed under the contractual relations between Ukrainian entities involved in foreign economic activity and their foreign contractors producing sugar. However, virtually the total volume of imported sugar is supervised by the Ministry of Agrarian Policy and UkrTsukor Association. Thus, today import of sugar depends on the following three counterparties – the Ministry of Agrarian Policy, UkrTsukor, and entities involved in foreign economic activity,” said Ms. Polovets.
She explained that in case the changes to the Procedure of the Establishing Tariff Rate Quota to Import Raw Cane Sugar to Ukraine are adopted, the entities of foreign economic activity, though being the main link, will be excluded from the chain, and the import of sugar will depend on contractual relations between producers and the Derzhkomreserv and Agrarian Fund...


Ban on import of non-exotic fruit and vegetables contradicts WTO regulations

Kyiv. November 9, 2010

The Cabinet of Ministers of Ukraine’s intentions to ban the import of non-exotic fruit and vegetables are out of line with a number of commitments a country undertakes when accedes the World Trade Organization, believes Associate of Volkov and Partners Tatiana Kheruvimova.
Such opinion was expressed in the interview to UNTERFAX-Ukraine by the Associate that commented on the recent announcement by Minister of Agriculture Mykola Prysiazhniuk as regards the government’s intentions.
“A possible ban is to shore up domestic prices, which may mean protectionist moves by Ukraine for importers”, said Ms. Kheruvimova.
The Associate explained that in case where the government chooses to impose a ban without any required notifications and consultations with the WTO, such moves may result in alike restrictions for Ukraine from the side of importing countries.
In her opinion, considering that the application of measures might entail consequences both for importers and for national producers and consumers, it would be a good thing to conduct early consultations with the said participants of trade-economic relations.
At the same time, Ms. Kheruvimova explained that the national legislation and WTO regulations envisage a set of other mechanisms of trade protection of the national producer, “for example, anti-dumping, safeguard or anti-subsidy investigations”.
Thus, according to the Associate, in case of import surge, injurious to the national producer, the latter enjoys the right to apply with the Ministry of Economy to initiate a safeguard investigation that may trigger the imposition of safeguard measures.
Reportedly, in the course of the meeting that was held in Vinnitsa region and concerned the situation in the food market and autumn-field works completion Minister of Agriculture Mykola Prysiazhniuk reported that the government intends to ban the import of non-exotic fruit and vegetables...


Auction sale of grain quotas contradicts WTO rules

Kyiv. October 25, 2010

“The auction sale of grain export quotas in Ukraine is at variance with World Trade Organization (WTO) rules, and will throw the grain market into uncertainty and question fulfillment of contractual obligations by exporters,” says Associate of Volkov and Partners Law Firm Andrii Zablotskyi.
The aforementioned has been his commentary to the Interfax-Ukraine Agency on a governmental intention to introduce the sale of grain export quotas at auction with the purpose to prevent corruption, which has been recently announced by First Vice-Prime Minister Andriy Klyuyev.
“Should the Cabinet of Ministers of Ukraine adopt the procedure of quota sale at auctions, it risks breaching WTO rules. Moreover, taking into consideration that the Ministry of Economy has been accepting export license applications from October 20, the decision on introduction of sale of quotas at auctions, if adopted, will throw grain market into uncertainty and question fulfillment of contractual obligations by exporters," told Mr. Zablotskyi.
According to him, Article VIII of GATT 1994 reads that all fees and charges of whatever character imposed by contracting parties in connection with importation or exportation shall not represent a taxation of imports or exports for fiscal purposes.
Mr. Zablotkyi also said that the same objectives pointed out in the explanatory note to the bill on changes into the Law “On Foreign Economic Activity” (regarding auction sale of quotas) No.7230. Thus, if the bill is not adopted, the Cabinet of Ministers won’t be able to hold the auctions.
This document extends Cabinet of Ministers’ competences, authorizing the state higher executive body to decide "…on application of exports (imports) licensing, including, but not limited to, quotas establishment (quantitative and other restrictions), as well as an auction sale of quotas…” explained Mr. Zablotskyi.


Draft government decree on grain quotas introduction contravenes WTO commitments

Kyiv. October 13, 2010

“The Cabinet of Ministers of Ukraine’s draft decree on grain export quotas, under which the quotas have to be introduced totaling 2.7million tons before December 31, 2010, does not comply with commitment Ukraine has undertaken while accessing to the World Trade Organization (WTO),” considers an Associate of Volkov and Partners Irina Polovets.
It was her comment to the Interfax-Ukraine Agency on the draft decree, developed by the Ministry of Economy of Ukraine and recently published at the department’s web-site.
“The only possible reason to introduce quotas may be for critical want of foodstuff in the exporting country, but the draft decree does not identify such critical deficiency prevention as the purpose for its adoption,” said Ms. Polovets.
The Associate explained that Article XI:1 of the General Agreement on Tariffs and Trade prohibit WTO members from export restrictions by quotas imposition, export certificates or any other measures, save for duties, taxes and other charges.
Besides, the lawyer says “considering that Ukraine’s export quotation poses a threat to price inflation in the countries importing grain originated in Ukraine, we do not rule out complaints to be filed against Ukraine with the WTO”.
“Moreover, Ukraine’s trade partners could turn to similar measures in response to Ukraine’s actions,” summed up Ms. Iryna Polovets.
Reportedly, the government’s draft Decree on grain export quotation released at the Ministry of Economy’s web-site contemplates the wheat quota of 0.5 mln tons, barley quota of 0.2 mln tons and corn quota of 2 mln tons.
The draft Decree determines the procedure of quotas’ allocation and imposes a de facto prohibitive quota in the amount of 1 000 tons for rye and buckwheat exports.
The allocation of quotas will be based on the conclusions by the Ministry of Agriculture with due consideration of the quantities declared by a company for export...


Expert opinion: just single legislative initiative suffices to dissolve tax militia

Kyiv. October 13, 2010

The dissolution or re-subordination of the tax militia (police) do not obligatory require specific amendment to be introduced into the draft Tax Code, believes Attorney at Law from Volkov and Partners Taras Rozputenko.
In the interview to Interfax-Ukraine he commented on the initiative as regards the dissolution of the tax militia, which the Parliamentary Committee for Industrial and Regulatory Policy and Entrepreneurship proposes to promote by amending the respective provisions of the draft Tax Code.
"This structure could be liquidated by introducing the respective draft law with the Verkhovna Rada of Ukraine  addressing amendments into the Law of Ukraine "On the State Tax Service of Ukraine", said Mr. Rozputenko.
At the same time, he pointed out that the dissolution within the meaning of “liquidation” is unlikely to occur.
According to the Attorney at Law, in case of full liquidation of the tax militia the relevant structural division should be established from the ground up and, accordingly, the relevant regulatory framework for such division should be established too. “In practice such structural shifts are rare”, admitted Mr. Rosputenko. “The tax militia division with its existing scope of rights is most likely to be transferred to the Ministry of Internal Affairs’ subordination. In such case the legislation would see little changes”, supposed the Attorney at Law.
Mr. Rosputenko noted that considering a numerous announcements by the government officials and assessment of some of their actions (including the draft law initiative), it may be concluded that the state is gradually proceeding to reformation of the system of law enforcement agencies. This move evokes obvious positive responses in Ukraine and from the world community.


Lawyers are divided as to whether owners of 95% of JSCs shares may force minority shareholders to sell their stakes

Kyiv. September 30, 2010

The draft Tax Code of Ukraine contemplates that an income gained by an individual from a deposit placed with a bank in 2010 be subject to a 5% tax, starting from 2011 and till the expiration of a contract.
This opinion was expressed to Interfax-Ukraine by Associate of Volkov Koziakov and Partners Ruslan Malinovskyi, commenting on the provisions of the draft Tax Code developed by the government and registered with the Parliament.
"The absence in the draft Tax Code of the provisions stipulating its application to legal relations occurred before its adoption and persisted could likely lead to various conflicts with tax authorities", believes Mr. Malinovskyi.
He explained that the draft Tax Code provisions involving taxation of individuals’ incomes arising out from deposits placed with commercial and state banks determine the application of established rates and taxation procedure for such incomes solely in compliance with the code.
According to the Associate, exclusively the provisions of the Code and general rules envisaging that the legislation has no ex post facto within the time, except for cases prescribed by the law, must be applied to the deposit contracts executed in 2010 and remained effective after the Tax Code's coming into force.
Moreover, Mr. Malinovskyi pointed out that while defining an amount of income derived by an individual from a deposit one must count for a minimum wage established for that period of time when an income will be paid to an individual.
Reportedly, before the draft Tax Code adoption the government of Ukraine voiced an idea to impose tax on incomes arising from every deposit exceeding the amount of UAH 200 000, which was supposed to insert into the said draft Code.


Lawyer: fees for verification of individuals ID-numbers unlawful

Kyiv. September 29, 2010

Fee-based verification by the Tax Service bodies of an individual’s ID-number issued by the State Tax Administration of Ukraine (the STAU) contravenes the law, believes Associate from Volkov Koziakov and Partners Ruslan Malinovskyi.
“The question on fees charged for the services provided undermines legal grounds for establishment of the bodies of the Tax Service of Ukraine and the watchdog authority – the STAU", said Mr. Malinovskyi, commenting to Interfax-Ukraine on the draft law recently passed by the Parliament in the first reading. The said draft law contemplates that the credit history bureau be empowered to obtain fee-based information on authenticity of an individual-taxpayer’s ID-number from the state tax service bodies.
According to the Associate’s explanation, the Law “On the State Tax Service” does not lay down any legal grounds for the state tax inspections and administrations, structurally subordinated to the STAU, to inspect superior watchdog authority, as well as registration of individuals – taxpayers.
Reportedly, the Verkhovna Rada supported the draft law in the first reading, whereby it is offered to prescribe that the State Tax Service has to verify at the credit history bureau's request identification number issued to an individual, taxpayer, and payer of other obligatory payments.
In addition, the draft law sets forth that the procedure and amount of fee charged for the verification have to be determined by the Cabinet of Ministers of Ukraine.


Responsibility to declare taxable deposits conferred on depositors

Kyiv. September 24, 2010

In case of the draft Tax Code adoption the banks having a tax agent status in relation to taxable deposit interests will not bear responsibility for completeness of information disclosed by a depositor with regard to total amount placed on deposits with different financial institutions, as reported by lawyers interviewed by Interfax-Ukraine.
According to Associate of Volkov Koziakov and Partners Taras Rozputenko, disclosure, if requested by regulating authorities, by banks of certain information relating to legal entities is governed by the applicable legislation, but disclosure of like information relating to individuals in case where a bank serves a tax agent is not specified.
Thus, under the law and the draft Tax Code, if funds deposited with two or more non-related banks, the responsibility to determine the amount of taxable income is rested on an individual who entered into a respective bank deposit agreement.
Mr. Rozputenko pointed out that individuals may optimize the taxation of deposit interests exceeding the limit envisaged by the draft Code through opening deposit accounts in the name of relatives.
”A legal instrument to optimize taxation of incomes arising from deposits could be distribution of the deposited funds amidst related individuals, for example family members", said Mr. Rozputenko...


Ukraine takes tobacco and alcohol dispute with Armenia to WTO

Kyiv. September 20, 2010

Fοr t? first time since Ukraine became a World Trade Organization (the WTO) member, t ? requested t?t WTO Dispute Settlement Body establish a Panel tο settle a dispute wt? Armenia concerning less favourable conditions fοr the import οf Ukrainian tobacco and alcohol t?n for like products οf national origin.
The respective request was posted on WTO's web site.
According to Ukraine’s statement, Armenia gave no response to Ukraine’s request for consultations. As such, there was no way to settle the dispute through negotiations.
"In case where a country refuses from consultations or does not go on them, a WTO member having placed a request for the consultations enjoys the right, under Article 4.3 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes, to immediately request the establishment of a panel to settle a dispute," Andrii Zablotskyi, an Associate from Volkov Koziakov & Partners, reported to Interfax-Ukraine.
He also highlighted that having reviewed the case, the Panel issues recommendations for the county, which has violated the WTO agreements, to bring its legislation in line with the respective WTO standards...


Opinion: creation of single market mechanism for trading in pollution credits to allow increase in foreign investments inflow

Kyiv. September 20, 2010

Creation of single carbon market between Ukraine, Belarus, Kazakhstan and Russia, initiated by Ukraine, will allow for faster development of necessary legislative framework to regulate man-made emissions of greenhouse gases into the atmosphere, an associate from Volkov Koziakov & Partners Olena Hladyuk believes.
This was her comment to Interfax-Ukraine Agency on stated initiative that has been promulgated by the National Environment Investment Agency of Ukraine the other day.
“A single market mechanism of trading in pollution credits will create prerequisites to raise material funds for modernization of economic sectors, possibility to reduce development pressure on the Ukrainian territory,” Ms. Hladyuk said.
According to her, should such trade mechanism be available, this will give rise to significant interest of business entities in reduction of greenhouse gas emissions and discover some alternative funding sources for these projects based on international cooperation mechanisms. Moreover, it might lead to the material social, economic and environmental benefits.
Thus, Ms. Hladyuk supposes that implementation of the idea will provide Ukraine with the possibility for proactive use of mechanisms, provided under the Kyoto Protocol as a part of the UN Framework Convention on Climate Change.
At the same time, the Associate pointed out that all preliminary arrangements geared for Ukraine to implement the provisions of the United Nations Framework Convention on Climate Change and Kyoto Protocol thereto did not create proper prerequisites for effective application of the aforementioned provisions by Ukraine. The national system of estimation of anthropogenic emissions and absorption of greenhouse gases was brought into line with the international requirements at a snail’s pace.
Reportedly, the National Agency of Ecologic Investments of Ukraine is initiating the creation of carbon market jointly with the Russian Federation, Kazakhstan and Belarus as these countries use the same technologies inherited from Soviet times...

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