To commemorate Independence Day, we have made a compilation of the most important Ukrainian agro events which have affected the country’s agricultural sector.
Land Reform (1991)
The all-Ukrainian referendum which defined Ukraine as an independent country created the prerequisites for innovative farming methods. That same year, on March 15, the Ukrainian Parliament launched a land reform to distribute agricultural lands and assign them to farmers.
During the first independent decade, the government was intensively adopting new bills which changed all the established forms of ownership. On January 1992, the government started the second stage of reforms, and the Parliament adopted the law “On Forms of Land Ownership”: private, collective, and public. Soon, there were other decrees on the land lease, purchase, landowners’ rights protection, etc. The events of those years became the basis of the current agricultural sector in Ukraine.
Moratorium on the sale of land (2001)
In 2000, landowners started changing their land certificates (shares) to State Private Property Acts, thus creating natural conditions necessary to introduce the land market in Ukraine. However, the events of 2001 related to Leonid Kuchma halted the land reform final implementation procedures. On January 18, 2001, the Parliament adopted the law “On Agreements on the Alienation of Land (Shares)” which allowed Ukrainians only to rent or inherit their land share, nothing more.
Since the moratorium on the sale of land was adopted in Ukraine, the government repeatedly made efforts to resolve this issue and open the land market, but everything the authorities could do was just extended the moratorium. Officials replaced each other and two revolutions took place, but none of these events could help create fully-fledged land ownership, and that prevented farmers from getting funds, loans, etc. Since the land was an intangible asset that had no market value, it could not be used as a pledge in a bank.
Land Code (2001)
On October 25, 2001, the Land Code was adopted. It currently regulates land relations and defines the main points of virtually all land law institutions. This document was very much necessary because the Constitution of Ukraine did not stipulate all the important provisions on land ownership, its purpose, etc.
For several years, the Parliament changed and amended the Code, though, the changes were sometimes not good enough. Constant amendments to the Land Code did not allow Ukrainians to look ahead with confidence. During the whole period of the Code existence, the Ukrainian Parliament did not anyhow change it only in 2002.
On May 22, 2003, the Law “On Electronic Documents and Electronic Document Workflow” and “On Electronic Digital Signature” was adopted. The provisions of these laws improved public services quality and accessibility, as well as made it possible to take the executive branch activities under control.
E-governance also allowed improving public administration. Starting from that time, authorities introduced new online resources to regulate land relations: electronic registers, inventories, audits, and others. Today, agricultural businesses are actively using online tools to register their farms, certificates, property rights, etc.
Food security: 2003 grain market crisis
The grain market crisis started in the autumn of 2003. At that time, farmers harvested only 5 million tons of grain — 4 times less than in previous years. To ensure low prices for consumers and basic food products accessibility, the Ukrainian government interfered in the markets, setting retail prices maximum levels, trade margins, profitability levels, etc.
Unfortunately, grain reserves were not sufficient to cover all the losses. That is why the government had to buy grain from foreign countries. These events led to inflation and higher food prices.
Joining the World Trade Organization (WTO) (2008)
On April 16, 2008, Viktor Yushchenko signed the WTO accession law. From that moment, the country’s economic structure started to change: clear regulations on the world market were established, the legislation was adapted to world rules, and foreign trade methods were liberalized. Ukraine’s accession to the WTO has fueled the Ukrainian agribusiness since this agreement has significantly streamlined economic trade procedures, certifications, etc.
The most important thing is that the WTO guarantees the protection for agricultural businesses against unfair competitors in global and regional markets. The WTO mechanisms help Ukrainians defend their interests and solve trade issues with other members of the organization during committees and summits.
Timber export moratorium (2015)
A partial round timber export moratorium came into effect on November 1, 2015, and starting from January 1, 2017, restrictions applied to all timber species, including pine. The moratorium had to protect the environment and the Ukrainian agribusinesses. However, the mechanisms failed to work and just exacerbated EU discontent.
The law on round timber export prohibition triggered the “shadow” market activation in Ukraine, especially in the Transcarpathian region. Round timber went to the EU under the guise of firewood. In 2017, almost 0.5 million tons of timber was exported from Ukraine as firewood, though the EU accepted that cargo as round timber. This fraudulent scheme remains working even today.
Special VAT regime cancellation for farmers or “quasi-accumulation of VAT” (2017)
At the beginning of 2017, Ukraine switched to a general tax system. Back then, the government canceled the special VAT regime as requested by the IMF. This event allowed farmers to leave the VAT for themselves. Transfers from the budget replaced the existing AIC regulation form.
Although crop farming restored VAT export refunds which led to an increase in purchase costs, animal husbandry sector was not that much lucky. Switching to a general tax system caused revenue contraction for livestock agribusinesses because of the increase in feed costs which constitute about 60% of overall production costs.
The Law on Currency and Agrarian Receipts (2018)
The Law on Currency became effective on February 7, 2018. The Agro-Industrial Complex of Ukraine got new opportunities as this innovation simplified foreign economic relations and allowed farmers to receive additional financing from abroad.
Starting in 2018, the agribusinesses got access to “agrarian receipt” based loans allowing to pawn further yields. The new Law allowed farmers to get additional funds and increased the currency transactions security level because farmers pegged the yield value to foreign markets.
Family Farms and Single Tax (2018)
In the summer of 2018, family farms switched to a single tax. Back then, agrarians received an entrepreneur status. Thus, farmers started using a simplified tax system and got the opportunity to legally sell their products.
Besides, the authorities introduced a new form of support to family farm members, paying for them from 10 to 90% of the minimum unified social tax contribution. However, agribusinesses are obliged to grow food products, hire farm workers for seasonal work only, and own no more than 20 hectares of land.