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JEL code classification: H25

Аuthor(s) Serhii Kostornoi, Ph.D., Ass. Prof.
Dmytro Motornyi Tavria State Agrotechnological University
Аnbstract The agricultural sector of the economy is of strategic importance for Ukraine and needs state support. Many countries around the world use preferential value added tax rates for agricultural or food products to provide such support. The aim of the article is to systematize the approaches to the implementation of reduced VAT rates on agricultural products, as well as to determine their possible impact on the financial performance of enterprises in the agricultural sector of the economy. The article systematizes the features of use reduced VAT rates for agricultural products, food, agricultural resources and services in the EU. Reduced VAT rates on food are applied in twenty-four out of twenty-eight countries. They are used mainly for basic necessities – bread, meat, dairy products, vegetables. Alcoholic beverages and luxury products are taxed at the standard rate. In 16 countries, in addition, reduced rates on agricultural resources (seeds, fertilizers, pesticides, spare parts, agricultural services) are also applied. In 2020, Ukraine applies value added tax rates of 20%, 7% and 0%. However, in order to support the agricultural sector of the economy, the issue of taxation of agricultural products and foodstuffs at reduced rates is being discussed. The article discusses in detail the bill No3656, the adoption of which is the most likely.
The introduction of a reduced VAT rate on agricultural products of 14% will help support agricultural enterprises in Ukraine, limit common tax evasion schemes. However, negative consequences are also possible: the tax burden will be redistributed to processing enterprises, their financial condition will deteriorate, food prices will not fall. Most EU countries apply an integrated approach – not only agricultural products are taxed at preferential VAT rates, but also products of their processing, as well as the main resources intended for use in agriculture (seeds, fertilizers, pesticides, etc.). But the implementation of reduced VAT rates in this format will lead to a significant reduction in VAT revenues to the budget.
Key words taxation, value added tax, VAT rates, agricultural products, agricultural enterprises.
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