A draft law that proposes to raise oligarchs’ rents for extracting iron ore may actually allow them to pay less, experts warned.
Bill 5600, commonly called the “anti-Akhmetov” bill, was pitched as a tax code amendment that would force Ukraine’s iron producers to pay an extra Hr 3 billion ($111 million) to the state budget each year. It was named after Rinat Akhmetov, Ukraine’s wealthiest oligarch, whose companies produce half the iron in the country.
The nonprofit Center for Economic Strategy on Sept. 28 reported that after being approved in the first reading in July, the bill was amended in the oligarchs’ favor.
According to the Center, the latest version of the bill reducing the iron producers’ tax base by up to $20 (the cost of shipping iron from Ukraine to China) and another $10 (the cost of logistics within Ukraine.)
As a result, companies that now pay $3 per ton in rents, would pay $2.45 instead, thanks to the bill and low global iron ore prices, according to Yurii Gaidai, senior economist at the Center for Economic Strategy.
“Oligarchs will pay for ore mining even less than they do now,” the Center for Economic Strategy said in a statement. Gaidai called it Ukraine’s “sad story of ‘de-oligarchization.”
Parliament has already adopted several out of 11,000 amendments that have been submitted to the bill between readings.
In May, President Volodymyr Zelensky announced that increasing the tax on iron ore — the raw material used to produce steel — is “one of the most important tax reforms” in the country.
The government’s original plan was clear: higher world prices would require higher rents — up to 10%, if one ton of iron ore was worth more than $200 per ton. If the price fell below $100 per ton, the rent was going to be 3.5%.
The state budget was supposed to get an additional $110 million, while key players in the market, such as the Ukrainian oligarch Rinat Akhmetov or the tycoon Kostyantin Zhevago, would earn less from ore mining.
The bill has changed significantly since being introduced.
According to Volodymyr Datsenko, an expert from investigative website Nashi Groshi, currently, the state earns “over ten times less on iron ore mining than those who extract it.” Those companies are not ready to give up hundreds of millions of dollars in profit each year.
“Oligarchs do not like to pay. Otherwise, they would not have become oligarchs,” said Datsenko said on Sept. 11.
