​Minister of Finance O. Danyliuk: “Thanks to the monetization of subsidies, we can control every hryvna paid from the state budget in 2018 for exemptions and subsidies to the citizens, and we will not allow a return to the intransparent schemes ”

3/7/18

“The new mechanism for the monetization of subsidies enables us to control every hryvna paid from the state budget in 2018 for exemptions and subsidies to the citizens, and we will not allow a return to the intransparent schemes from the past”, Minister of Finance Oleksandr Danyliuk said today.

According to the Minister of Finance, a well-coordinated campaign is now on the way to discredit the new transparent subsidy mechanism which was approved by the Government, independent experts and all parties involved in the monetization of subsidies. In the course of this campaign, figures are often manipulated and information about the new subsidy mechanism is misinterpreted to make an impression that it is designed mostly in favor of regional gas distributors (oblgas). This is an absolute nonsense and has nothing to do with reality. For instance, the new mechanism does not allow oblgas companies to use funds for other purposes than paying to the group of companies of the JSC “Naftogaz of Ukraine” for gas supply and for the transportation of gas as well as paying taxes and fees to the state budget.

The Government and the Ministry of Finance cannot tolerate a return to the previous intransparent and ineffective system of clearing settlements regarding the subsidy for exemptions and subsidies for the citizens.

It is absolutely important for the Government to spend every hryvna from the state budget in an effective way. That is why, the new system for subsidy settlements which was launched on January 1, 2018 is subject to permanent monitoring.

The Ministry of Finance regularly publishes information about the transfer of the subsidy from the state budget to local budgets to finance exemptions and subsidies for housing utilities delivered to citizens.

Thus, in the period from January to February 2018, UAH 18.3 billion were transferred for exemptions and subsidies to citizens, including:
• For electricity – UAH 1,124.1 million (6.1%);
• For gas – UAH 10,853.7 million (59.1%);
• For heating – UAH 4,725.4 million (25.7%);
• For water supply and sewage water disposal – UAH 539.5 million (2.9%);
• For apartment rent and other utilities – UAH 1,118.4 million (6.1%), including UAH 461.6 million transferred to the bank accounts of OSBBs/ZhBKs.

Out of UAH 18.3 billion, the state budget has already received back UAH 5.4 billion in taxes. Further UAH 1.8 billion are placed on the accounts for electronic VAT administration (equal to 40% of the subsidy volume).

UAH 1 billion are on the accounts of local budgets and social welfare departments (5%).

As per 01.03.2018, UAH 6.8 billion were placed on the accounts of companies open at the State Treasury Office – JSC “Naftogaz of Ukraine” (37%).

Other subsidy amounts were transferred directly to the suppliers of electricity to their accounts at the Oshchadbank.

At the same time, payments between companies are the business of these companies. That is why, the settlement of debts between the JSC “Naftogaz of Ukraine” and the oblgas companies is the matter of their business relations only.

“Gas debts have been accumulated for years, and now it is not about the monetization mechanism, but about the persistent lack of trust on the market and about intransparent business schemes. But we will not allow the situation, when gas debts and the ineffectiveness of some of companies are subsidized at the cost of taxpayers”, Oleksandr Danyliuk stressed.

In 2017, when the clearing settlement mechanism was in use, it helped shift significant funds without entailing any tax obligations for the JSC “Naftogaz of Ukraine”.

As a consequence, starting from the beginning of 2018, the JSC “Ukrgazvydobuvannia” accumulated overpayments in taxes amounting UAH 5.2 billion related to the mutual settlements in 2017.

Due to that, despite the monetization of subsidies introduced on January 1, 2018, due taxes were not paid in January and February 2018 and will not be paid in March 2018 either.

Subsequently, the state budget will be missing UAH 5 billion in tax revenues in 2018.

It is of absolute importance for the Ministry of Finance to ensure that the budget funds – which are taxpayers’ money – are spent in a transparent and effective way. This is the objective of the reform in the system of payments for housing utilities.

“Subsidy funds will continue to be transferred as “real” money within the timeframes set by law to the accounts of all market entities without any deliberate hurdles or preferences for anybody. There won’t be any arbitrary mechanism any more. And there will be no comeback for the clearing settlements which discredited themselves long ago”, Minister of Finance O. Danyliuk pointed out.

The Ministry of Finance will continue to monitor and to control subsidy payments from the state budget to local budgets for exemptions and housing subsidies to citizens.

For information:
On January 1, 2018 the monetization of subsidies at the level of service providers was implemented in Ukraine.

Clearing settlements for subsidies were abolished. Instead, direct payments to service companies were implemented, which significantly simplified settlements between the participants of the monetization process.

Presently, subsidies are transferred directly by the State Treasury Office without any protocols, in line with the purposes of the subsidies and directly to the respective entities.

The subsidies are transferred for actually consumed energy and delivered services, which makes it impossible for service providers to receive more funds than actually consumed by households.

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