ARCELORMITTAL KRIVIY RIH RECEIVES VAT TREASURY BONDS
Government of Ukraine owed steel company $400 million in unpaid vat tax refunds
Steel Orbis, Istanbul, Turkey, Friday, September 10, 2010
KYIV - ArcelorMittal Kriviy Rih, Ukraine-based subsidiary of the world's largest integrated metals and mining company ArcelorMittal, has stated that it has received VAT refunds through VAT treasury bonds claimed in the amount of the debt accumulated up to May 1, 2010.
"We acknowledge that we received last Friday the VAT bonds in payment for our accumulated debt until last May 1. Understanding the challenging situation the Ukrainian government is facing with VAT refunds, we have accepted that issuing the VAT treasury bonds was a controversial but necessary compromise decision.
"We have accepted this compromise against the government commitment that VAT refunds from May 1 onwards will be made in cash and on time, and we are now confident that the government will comply with its commitment," ArcelorMittal's executive vice president Arnaud Poupart-Lafarge has stated.
"As an enterprise to which the state owes the biggest VAT refund debt, we perceive the issuing of the VAT treasury bonds as an important milestone in resolving the VAT refund issue. We expect the reestablishment of the automated VAT refund to take place soon," ArcelorMittal Kriviy Rih's CEO Rinat Starkov commented.
As of August 18, 2010, Ukrainian government's VAT refund debt to ArcelorMittal Kriviy Rih was UAH 3.186 billion (about $401.26 million), of which the debt of UAH 1.7 billion (about $214 million) up to May 1, 2010 was claimed via VAT treasury bonds.
USUBC NOTE: The government of Ukraine did not pay back VAT tax refunds they owed private companies for over two years. By the summer of 2010 the government owed many large private exporters from Ukraine such as ArcelorMittal, grain companies and others exporters hundreds of millions of dollars with the total being almost three billion dollars. When the government finally decided to pay back the VAT tax refunds owed up to May 1, 2010, the government did not do this in cash as is normal in most modern countries, they issued 5 year 5 1/4% bonds which then sell on the market for a huge discount. Instead of cash in and cash out, it was cash in and discounted bonds out. The government has not yet announced a program to pay back the VAT tax refunds built up since May 1, 2010 even though under the terms of the IMF agreement the government is supposed to set up and implement a modern, internationally accepted cash in, cash out VAT refund system.