Farmers call on the authorities not to increase the excise duty on fuel: a threat to harvesting

Agrarians of Ukraine call on the authorities to postpone and reconsider the increase in excise duty on fuel, which can significantly increase the costs of the agricultural sector during harvest. In difficult conditions of minimal working capital, this can be a critical blow for farmers.

The Association "Ukrainian Club of Agrarian Business" (UKAB) draws attention to the changes to the Tax Code of Ukraine provided for by draft law No. 11256-2 of May 29, 2024. According to this document, the increase in excise duty on fuel is due to the need to implement the provisions of the European Union's legal acts, in particular Directive No. 2003/96/EC, which is aimed at achieving the environmental goals specified in the EU Green Agreement.

UKAB emphasizes that even in the EU, farmers are protesting against the cancellation of tax incentives for agricultural diesel fuel, a sharp reduction in greenhouse gas emissions, and the use of pesticides and fertilizers. In Ukraine, this problem is even more complicated due to the consequences of a full-scale war, which greatly complicates the situation for local farmers.

The proposed changes provide for an increase in excise tax rates from July 1:

- for automobile gasoline by 14%,
- for diesel fuel by 27%,
- for liquefied gas by 217%.

If this bill is passed, fuel prices are expected to rise to UAH 57.44/liter for gasoline, UAH 54.99/liter for diesel, and UAH 32.57/liter for gas in the summer. This period coincides with the beginning of the harvest, when farmers especially need fuel, but most of them do not have the opportunity to buy it in large volumes in advance due to the risk of destroying stocks during air attacks.

The increase in excise duty will significantly affect the cost of agricultural products, which will increase by several percent only due to the increase in fuel costs. Fuel costs account for up to 10% of the cost structure of agricultural products, which makes this problem extremely important for farmers.

In addition, from January 1, 2028, it is planned to further increase excise rates on the main types of fuel: on automobile gasoline by 68%, on diesel fuel by 137%, on liquefied gas by 433%. This may lead to an increase in fuel prices to UAH 66.92/liter of gasoline, UAH 66.15/liter of diesel, and UAH 58.48/liter of gas.

UKAB reminds that the legislator is obliged to observe the principle of stability of tax legislation, which means that changes to taxes and fees cannot be made later than six months before the start of the new budget period. Thus, the proposed fuel excise tax increases may be implemented no earlier than January 1, 2025.

The association hopes that the government will take into account the position of domestic producers and will not be in a hurry to copy EU legislation during the martial law period. It is important to ensure the stability and support of the agricultural sector, which is critical for the economy of Ukraine at this difficult time.