This paper contributes to the discussion of the value added taxation of agriculture in Ukraine. Special VAT regime for agriculture is currently in place in Ukraine. It allows agricultural producers to accumulate VAT at special accounts and spend these funds for production purposes without transferring to the budget.

However, such taxation regime de facto leads to lower farm-gate prices and smaller investment incentives for companies. Still, it is perceived by agricultural companies as a major state aid measure against the background of low and inefficient direct fiscal support. However, the assessment indicates that Ukrainian agricultural companies and the Government would win from the introduction of VAT on a regular basis for large agrarian companies (with a rate of 20%) with possible special VAT regime for small companies as it would improve financial position of companies.

Fiscal revenues from agriculture will also grow with increasing agricultural production. The introduction of a regular VAT regime for agriculture should be complemented with other policy steps, which include fiscal consolidation, anticorruption measures, and reform of direct state aid to agriculture.

The full version of the text is available on web site in English: http://www.apd-ukraine.de/de/publikationen/analitichni-zviti.