Imposing of Consumer Tax on Sugar-sweetened Beverages: The Outcomes for Ukraine’s Sugar Sector

23 Pages Posted: 22 Oct 2024

See all articles by Oleg Nivievskyi

Oleg Nivievskyi

Kyiv School of Economics; Free University Berlin; University of Queensland - School of Economics

Roman Neyter

Kyiv School of Economics

Pavlo Matyshev

Kyiv School of Economics - Kyiv Economics Institute (KEI)

Volodymyr Vakhitov

American University Kyiv

Date Written: January 15, 2022

Abstract

Sugar sector has been playing a decreasingly marginal role in Ukraine’s agri-food sector and economy overall. After the breakup of the Soviet Union in 1991, Ukrainian sugar industry output decreased from about 5 million tons in 1991 to 1.6 million tons currently. Sugar produced from sugar beet is consumed mainly domestically. The share of sugar in the food industry has decreased from 5% in 2005 to 1.8% in 2019 and the share of sugar beet output in agricultural output from 3% in 2005 to 0.9% in 2019, despite a stable overall contribution of agriculture and food industry to Ukraine’s economy.

Ukrainian sugar sector is effectively isolated from international competition and imports of sugar are restricted by a 50% import tariff.  Sugar sector has also been increasingly vertically integrated with sugar beet farmers under sugar holdings, which are becoming more consolidated and efficient. Ukraine’s sugar beet and sugar production is located mainly in the central and western parts of Ukraine. Sugar beet areas have contracted by more than 7 times since 1991, however due to higher productivity the yields have doubled since then.  Almost the whole volume of sugar beets has been produced by relatively large farms affiliated with sugar holdings, while the share of small farmers has reduced to negligible volumes.  Domestic consumption of sugar (both by households and downstream sectors) has been gradually declining primarily due to a reducing population and downward trend in per capita consumption of sugar. On the other hand, the consumption of sugar-sweetened beverages (SSB) is growing. This means that the sugar industry is going to rely more on the downstream sectors, including the SSB industry.

The SSB industry in Ukraine creates an estimated 164 thd tons of sugar demand or 8% of supply in 2018/19.   Over the last decade, however, the sugar industry has proven to be quite flexible in its ability to export whatever exportable surpluses are available in Ukraine, primarily to Central Asia. In the 2016/17 marketing year, for example, Ukraine’s sugar industry exported as much as 813 thd tons of sugar. So all in all, additional exportable surpluses of sugar of less than 1 to 23 thds tons due to a new SSB tax will most likely be exported without any sizable effect on industry performance whatsoever (both in terms of sugar plants and sugar beet farmers). However, small farmers could be encouraged to swap to more profitable crops through supportive government policies. 

Keywords: tax, Ukraine, sugars, sugar-sweetened beverages, sugar industry

JEL Classification: D62, H23, H22, Q13, Q18

Suggested Citation

Nivievskyi, Oleg and Neyter, Roman and Martyshev, Pavlo and Vakhitov, Volodymyr,

Imposing of Consumer Tax on Sugar-sweetened Beverages: The Outcomes for Ukraine’s Sugar Sector

(January 15, 2022). Available at SSRN: https://ssrn.com/abstract=4957120 or http://dx.doi.org/10.2139/ssrn.4957120

Oleg Nivievskyi (Contact Author)

Kyiv School of Economics ( email )

vul. Mykoly Shpaka 3
Kyiv, 04119
Ukraine

Free University Berlin ( email )

Germany

University of Queensland - School of Economics ( email )

Roman Neyter

Kyiv School of Economics ( email )

Pavlo Martyshev

Kyiv School of Economics - Kyiv Economics Institute (KEI) ( email )

Kyiv, 04119
Ukraine

Volodymyr Vakhitov

American University Kyiv ( email )

3, Poshtova Sq
Kyiv, Kyiv 04070
Ukraine
04070 (Fax)

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