Puppets of Kolomoysky: Why parliamentary tax committee is under oligarch’s thumb?

Author : Igor Smolov

Source : 112 Ukraine

These days, Verkhovna Rada has held regular hearings on some aspects of bills 1210 and 1210-1 on tax issues
23:32, 26 September 2019

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These days, Verkhovna Rada has held regular hearings on some aspects of bills 1210 and 1210-1 on tax issues. Market participants have literally overwhelmed the profile committee with letters warning them that the proposed changes could collapse the leading sectors of the economy in tax revenues and provoke disastrous consequences. However, Servant of the People party members are adamant, and the bill, the norms of which are clearly visible only to one beneficiary - odious oligarch Igor Kolomoysky - might be voted in the first reading next week. Kolomoysky has a huge influence in the parliamentary tax committee, where a number of MPs are connected with him by common business interests, and the rest will vote as they should by order of the faction.

Committee on Finance, Taxes, and Customs Policy held regular hearings on areas of the economy that affect the provocative bill No. 1210 on amendments to the Tax Code. The last committee hearings were attended by numerous people who wished to convey this point of view to the MPs, so one of the sections was postponed to October 1.

Related: President’s Office: No transcript or video from Kolomoysky-Zelensky meeting

The round tables of the profile committee were attended by Servant of the People faction representatives, but not many of them. But why, if this is such an important bill? The vast majority of the committee members from the Servant of the People are sitting there not to solve problems, but to vote. The issues are decided by the leadership of the tax committee, members of which are often associated with Kolomoysky.

Pleasing Kolomoysky

So far, oligarch Igor Kolomoysky seems to be the only beneficiary, who would get profit from changes to the Tax Code, proposed by Bill No. 1210.

So, bill No. 1210 introduces amendments to the norms of stimulating rental rates for the production of natural gas from new wells. Moreover, it completely neutralizes the use of incentives for drilling new wells and using service contracts. The incentive norm was introduced in 2017 at the proposal of the Ministry of Finance after detailed consultations with the Ministry of Energy Coal and the State Fiscal Service. The Association of Gas Production Companies has repeatedly emphasized the positive effect of norm adoption. So, after its entry into force and the provision of state guarantees that rental rates will not change, there has been a noticeable increase in the gas production market since 2018. In particular, over the 20 months of the legislation, private companies have laid down almost 70 new wells, a third of which are deep (require large investments). For comparison, only 22 sites were drilled in 2017. The volume of gas production in the private sector in 2018 showed an increase of 7%, while in 2017 it decreased by 1%.

Kolomoysky’s Ukrnafta interests are clearly visible. This is a paragraph that changes the rules of the game in terms of accruing interest on the tax debt of this company. As you know, the debt was formed as a result of the withdrawal of money from the state-owned company through Kolomoysky's straw companies, and as of the end of 2018 amounted to 1,2 billion USD. Of this amount, 700,7 million USD are fines and penalties. At the same time, the amount of interest continues to grow.

In addition, the bill provides for an increase in rates for iron ore raw materials from 8 to 10%. This will hit companies that mine and export iron ore. At the same time, the rent rate for manganese ore, which is mined and enriched at Kolomoysky’s ore-dressing and processing enterprises, does not change. In addition, bill No. 1210 also provides for changes in calculating rental payments (additional tax for iron ore at ore-dressing and processing enterprises).

Related: French media concerned regarding oligarch Kolomoisky's influence on president Zelensky

Against this background, ArcelorMittal Kryvyi Rih even announced that it would withdraw about 433 million USD in dividends from Ukraine, although the company had previously decided to invest this money in development.

British American Tobacco moves the regional center from Kyiv to Romania because of the "unpredictable fiscal and regulatory policies of the Ukrainian government."

All of these initiatives might have serious consequences for the Ukrainian economy. In particular, the changes proposed for the iron ore mining industry can cause a huge blow to the metallurgical industry and lead to the collapse of hryvnia, as a result of a decrease in exports and, consequently, foreign exchange earnings. If the changes are adopted in their current form, the ratio of rent to commercial profit will be 10 times higher than in Russia, Oleksandr Kalenkov, the president of Ukrmetallurgprom (Ukrainian Association of ferrous metallurgy enterprises), said. And this is despite the fact that Russia is the main competitor of Ukraine in the European markets of iron ore; first of all, it is the Metalloinvest company of Alisher Usmanov, a famous oligarch close to Vladimir Putin.

Changes in approaches to taxing the iron ore industry appeared after an interview with Kolomoysky s, in which he talked about allegedly super-profits of Ukrainian ore mining and processing enterprises, and called on the authorities to impose restrictions on its export.

Related: US ex-ambassador warns Zelensky about compromising with Kolomoisky

Puppets of Kolomoysky

And the MPs will probably vote as the faction leadership says. In particular, Igor Kolomoysky has a very serious influence in the tax committee, and the market participants call the bill "Kolomoysky changes."

The leadership of the parliamentary committee on finance, taxes and customs policy has at least three people from the Kolomoysky-Khomutynnik (Vitaliy Khomutynnik, Ukraine’s former MP, businessman, - ed.) team. There are 32 such people in the committee, 20 of whom are from Servant of the People.

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Danylo Getmantsev, the head of the committee and the author of the scandalous changes, is associated with Vitaliy Khomutynnik, the odious ex-MP and business partner of Kolomoysky (in particular, in the oil and gas business). Getmantsev is one of the co-founders of the M.S.L. lottery operator, which, according to a number of media sources, is informally controlled by two MPs - Khomutynnik and no less scandalous Serhiy Pashynsky, member of National Front party. In 2015-2017, M.S.L. was under sanctions. It was suspected of financing terrorism. The Security Service registered a criminal proceeding and conducted a pre-trial investigation. At the same time, Getmantsev himself actually admitted that the lottery used “legal shadow schemes.”

We should not forget about Oleksandr Dubinsky, deputy head of the tax committee. Dnipro city mayor Borys Filatov called Dubinsky "speaking as…hole of Kolomoysky."

Now Dubinsky from a very wealthy journalist instantly turned into a very influential parliamentarian - he holds a senior position in the tax committee, has been delegated to the competition committee for the selection of independent members of the supervisory boards of state banks, including PrivatBank.

Among the committee members, there is another ex-journalist of Kolomoysky’s 1+1 TV channel - Olga Vasylevska-Smaglyuk. She is also a business partner of Kolomoysky. Vasylevska-Smaglyuk owns 0.1% of the shares of the 1 + 1 channel.

Igor Palytsia, secretary of the tax committee, is Kolomoysky’s long-standing business partner, and the oligarch himself has publicly admitted, this is his "friend."

Here we have mentioned only the obvious people who have earned the fame of the "servants of Kolomoysky." Will other members of the committee join them in the vote? This is a good question. The remaining Servant of the People members are people who predominantly have no political experience and are absolutely dependent on the will of the party leadership.

Related: Ex-head of National Bank Gontareva suspects oligarch Kolomoysky of arson of her house

“I realize that some of the MPs of the relevant committee (which considers the bill, - ed.) And the Verkhovna Rada might be dependent on Kolomoysky. But I want to think that they understand the degree of their own responsibility as a result of decisions made. The consequences (of the adoption of bill No. 1210 in the current edition, - Ed.) might be reflected on the economy, one may remember 2008, when the economy collapsed, the hryvnia exchange rate collapsed,” Oleksandr Kalenkov notes.

He emphasizes that some people will feel calm, moreover, they will be able to get even more benefits in a situation of chaos and influence on the authorities. Ordinary Ukrainians, law-abiding business, including MPs will pay: by their name, reputation and, of course, their political future.

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