Ukraine Considers Tax On Foreign Cars

by Tatiana Smolenskaya, Tax-News.com, Moscow

07 September 2012

Ukraine may introduce a new tax on Russian-made cars in retaliation against a Russian measure thought to have been introduced to support its domestic car industry ahead of substantial tariff reductions agreed as part of its World Trade Organization (WTO) accession package.

After almost two decades of negotiations, Russia joined the WTO on August 22, 2012. The nation agreed to lower its final legally-binding tariff ceiling to 7.8%, from a 2011 average of 10%, but requested a number of transitional arrangements for its key industries. Under one of the most generous concessions agreed, Russia was permitted to defer tariff cuts on foreign-made motor cars, helicopters and civil aircraft for seven years.

However, on September 1, Russia began imposing a 'utilization fee', also know as a recycling tax, on foreign-made cars

In response, the Ukrainian government has said it was drawing up plans for a similar levy, which, it is said, would add USD1,000 to the value of Russian-made vehicles, ostensibly to place pressure on the Russian government to revoke its own levy. However, in a bid to defuse the matter, the Ukrainian government has announced plans to draft a bilateral pact that would exempt both Russian and Ukrainian exporters from both nations' new levies, subject to agreement by Russian authorities.

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