The Grain Union of Kazakhstan reports stagnation in the grain market due to new Tax Code requirements (regarding the VAT credit for agricultural exports). According to Union representative Yevgeny Karabanov, if uncertainty persists, adjustments to domestic and export prices are inevitable, the APK News agency reports.
"The news that stirred up the market last week was the changes to the new Tax Code, effective January 1 of this year, regarding the VAT credit for agricultural exports. According to the Tax Code, for zero-rated agricultural exports, the VAT amount previously credited on purchased goods is subject to an 80% reduction (this is the VAT benefit available to domestic agricultural producers). The reversed VAT is not deductible for tax purposes and is written off against the exporter's net profit (after tax). "Thus, exporters' losses will amount to 12.8%. This will require transferring this amount to an increase in export value and/or a reduction in domestic prices for grains, legumes, and oilseeds," noted E. Karabanov.
According to him, the uncertainty in this situation has led to stagnation in the market.
"Some exporters have suspended the purchase and sale of goods, while others are forced to fulfill previously concluded contracts," the Union expert explained.
Numerous appeals from market participants to government agencies and the Atameken National Chamber of Entrepreneurs have prompted the holding of relevant consultations next week with the participation of all interested parties (the Ministry of Finance, the Ministry of Economy, the Ministry of Agriculture, the State Revenue Committee, and the Atameken National Chamber of Entrepreneurs), as these measures will lead to market fragmentation and could result in significant income losses for agricultural producers.
"Therefore, prices are nominal and will change depending on how the situation develops," stated Evgeny Karabanov.
Regarding prices, over the past week, domestic price increases affected only 5th-grade wheat by 1,000 tenge and barley by 2,000 tenge.
"The price increase for these crops is more of an inertial nature," said E. Karabanov.
Prices for other wheat grades remained unchanged.
"The new requirements of the Tax Code of the Republic of Kazakhstan, regarding the 80% reduction in the VAT credit for agricultural exports, have impacted market activity. The market has entered stagnation. If uncertainty persists in this area, adjustments to domestic and export prices are inevitable," concluded Evgeny Karabanov.
According to the Analytics Committee of the Grain Union of Kazakhstan, EXW prices - elevator, in thousands of tenge/t, including 16% VAT:
▪Wheat, 3rd grade (23-24% grade) - 92 - 96 (0)
▪Wheat, 3rd grade (25-26% grade) - 95 - 98 (0)
▪Wheat, 3rd grade (27% grade) - 109 - 113 (0)
▪Wheat, 3rd grade (28-29% grade) - 116 - 120 (0)
▪Wheat, 3rd grade (30+ grade) - 131 - 135 (0)
▪Wheat, 4th grade - 89 - 93 (0)
▪Wheat, 5th grade - 87 - 91 (+1)
▪Feed barley - 89 - 93 (+2)
▪Flax seeds - 225 - 235 (0)