Ukraine's cabinet of ministers intends to solve the VAT refund problem through the issuance of VAT-bonds, the country's prime minister, Mykola Azarov, said at a press briefing on Wednesday.
Accordingly, the issuance of these securities will be implemented up to July 1 this year.
The VAT refund issue has reached critical proportions in Ukraine. According to the Ukrainian association of metal producers Metallurgprom, the amount of overdue debts to domestic mining and metallurgical companies exceeds their monthly amount of working capital - ranging from UAH 200 million ($25 million) to UAH 700 million ($88 million). As of January 1, the state budget debt to the mining and metallurgical companies amounted to UAH 4.2 billion ($528 million). "The companies are forced to reduce production volumes, while their debts relating to loans and raw materials are going up," Metallurgprom said.
Today, the state budget owes ArcelorMittal Kriviy Rih more than UAH 3 billion ($377 million). "Recovering the VAT that is owed is vital to the implementation of the 2010 CAPEX program and therefore to the future of the company," reads ArcelorMittal Kriviy Rih's statement.
On the other hand, in March this year, the country's prime minister, Mykola Azarov, also promised that the government will refund VAT of UAH 150 million ($19 million) to the Ukrainian flat steel producer Ilyich Iron and Steel Works of Mariupol (Ilyich). Ilyich was the only Ukrainian company that threatened the shutdown of the plant if the state did not pay VAT refunds which exceed UAH 800 million (about $99 million). Mr. Azarov promised a monthly VAT refund to Ilyich.