Ferrexpo, a leading international iron ore company, has issued a stark warning about the potential economic devastation stemming from the Ukrainian tax authorities' decision to halt Value Added Tax (VAT) refunds amounting to around US$12.5 million. This move could force the company to slash its operations to a mere 25% of its total capacity, with far-reaching implications for the local economy and community stability.
The suspension of VAT refunds poses a direct threat to Ferrexpo's operational viability, potentially leading to significant job losses, a sharp decline in tax revenues, and a destabilization of the local communities that depend on the company. Executive Chairman Lucio Genovese has underscored the critical role Ferrexpo plays in Ukraine's economy, especially in these turbulent times, and the adverse effects the VAT refund suspension could have on the company and its stakeholders.
Among the dire consequences anticipated are the risk of thousands of jobs, a reduction in tax revenues to the Poltava region by at least 50%, a halt to future investments in Ukraine, and a 50% cut in the purchase of goods and services. The city of Horishni Plavni, with a population of over 50,000 including 8,000 internally displaced persons, stands to be particularly hard-hit by these developments.
The decision by the tax authorities is believed to be connected to personal sanctions against Kostiantyn Zhevago. However, Ferrexpo argues that these sanctions should not financially impact the company, which is majority-owned by international investors. Despite the current challenges, Ferrexpo has been a pivotal economic player in Ukraine since the onset of the Russian invasion, contributing significantly through salaries, supplier support, taxes, and capital investments.
Ferrexpo is urgently appealing to Ukrainian financial authorities to reinstate the VAT refunds and to provide support that will enable the company to maintain its operations during this critical period in Ukraine's history. The company's plea highlights the broader implications of the VAT refund suspension, not just for Ferrexpo but for the Ukrainian economy at large.
