At the end of February, President Vladimir Zelensky announced the launch of a new economic platform “Made in Ukraine”. It is aimed at supporting domestic producers.
One of the steps of such support is the launch of the state cashback program “Buy Ukrainian”. Within its framework, citizens will be able to receive compensation for part of the payment for goods and services produced in Ukraine.
“Our task is for Ukrainian money to stay in the country and work here. These are taxes, these are the salaries of our soldiers, these are the capabilities of our state, including defense. The parameters of the Ukrainian cashback are already being prepared: financial and technical,” Zelensky emphasized.
According to Deputy Head of the Presidential Office Rostislav Shurma, the program has already been developed 100%, but it still needs to be agreed upon with international partners. At the same time, the Cabinet of Ministers can adopt the program before the end of March. In any case, the top officials of the state promise that the state cashback will start working this year.
“Buy Ukrainian” - what’s the idea?
Buying products from domestic manufacturers is not a new idea. This is a remake of the programs of 1998, 2002, 2012, recalls People's Deputy, First Deputy Chairman of the Committee on Finance, Tax and Customs Policy Yaroslav Zheleznyak. Only then we were talking about the “Ukrainian Lanos”, and now - about simpler products.
The only real novelty of this proposal is that now cashback from the state and even real money will be received by end consumers, not businesses.
However, the “Buy Ukrainian” program can be perceived as a kind of import substitution, since cashback is a form of subsidies. Opponents of the initiative are convinced that in the end the same domestic producer that the state has undertaken to support will suffer.
“Behind these slogans lies the interference in the economy of officials who limit, prohibit, regulate, impose duties, taxes, provide subsidies and preferences. Because of this, everyone suffers, including the Ukrainian manufacturer,” notes Vladimir Popereshnyuk, co-founder of the Nova group.
It also raises an important question: who exactly should be considered a domestic manufacturer?
“Is the company that packages Ceylon tea in Finnish packaging in Kyiv a national manufacturer? The company that bolts the wheels to the car is the automaker? Or maybe it's McDonald's making burgers and fries? What about other restaurants? What about builders, agricultural producers, IT companies? In the end, Nova Poshta, Rozetka, ATB are national manufacturers?
What about the employee who creates a service for the employer - is he a national producer? A hairdresser, a doctor, a plumber and, in the end, a warrior who creates security services and protects us today - is this a national manufacturer? It turns out that everyone who creates, produces goods and services in Ukraine is a Ukrainian manufacturer,” says Popereshnyuk.
However, Rostislav Shurma claims that the methodology for distinguishing local goods from non-local ones has already been developed and agreed upon. For example, according to him, the seller should be a payer on the general taxation system, “so that they are not evaders, but stimulate transparent work.” That is, from Shurma’s words it follows that everyone who uses the simplified system, the same private entrepreneurs, will not be considered a national manufacturer. And this, according to the Ministry of Finance, is about 1.7 million taxpayers.
“Someone can debate the percentage of localization. But any product on the shelf, even if it is only packaged or branded in Ukraine, is already 40% of the retail price. And if this is payment of taxes, then the synergy for the country is clear,” added the deputy head of the President’s Office.
In addition, the state itself will focus on purchasing Ukrainian goods, although this mechanism, according to Rostislav Shurma, is still in development.
However, it is worth recalling that back in July 2022, changes to the law “On Public Procurement” came into force. According to them, a requirement has emerged for the localization of production of certain types of equipment, which are purchased through Prozorro with public funds. As of 2024, the degree of localization of production of such equipment in Ukraine should be at least 20%. You can read more about this at the link. In particular, there is a formula for how the degree of localization of a product is calculated.
How will the government pay cashback?
The algorithm is simple - it was worked out during the COVID-19 pandemic, when citizens were awarded the so-called “Covid thousand” for vaccination. After the start of a full-scale war, the system was refined, for example, within the framework of the “eSupport” and “eUpdate” programs.
“Cashback will be credited when you buy “Made in Ukraine” products at retail outlets. Cashback will be accumulated on a special card; these funds can be spent on the same goods from Ukrainian manufacturers. This way, each of us will feel our specific impact on the economy,” explains Deputy Minister of Economy Nadezhda Begun.
That is, you will need to make a special card in one of the partner banks, which will receive a percentage of the purchase of goods under the “Made in Ukraine” brand. The size of this percentage is still unknown, but according to Rostislav Shurma, “the figure is very worthy.”
It is also not yet known whether the cashback amount will be limited. For example, some banks that offer cashback to their customers limit the maximum amount.
Another nuance is the issue of verification. That is, how will the state know that a particular citizen bought some goods specifically under the “Made in Ukraine” program? Whether it is necessary to pay for them with the special card on which cashback will be paid, whether it is necessary to submit an application through “Diya”, or whether control will fall on the shoulders of partner banks - the answer will become clear after the presentation of the program.
The issue of taxation also remains open. The same bank cashback is taxed: 18% personal income tax and 1.5% military duty are paid on its total amount. Receiving cashback from a bank may affect the purpose of the subsidy, because, according to the Tax Code, cashback is income.
Where will the money for cashback come from?
According to Prime Minister Denis Shmygal, UAH 45 billion is allocated for business support programs this year. However, international partners will obviously bear the brunt. No wonder Shurma said that the program still needs to be agreed upon with them, although it is completely ready.
According to US Special Representative for Ukraine Recovery Penny Pritzker, the Biden administration has committed to allocate $230 million to support the Ukrainian private sector in order to preserve jobs, increase domestic and foreign demand, and stimulate tax revenues. She added that USAID also provides loans, assistance and grants to various sectors of the Ukrainian economy.
But no one has officially commented on the sources from which cashback for the purchase of domestic goods will be financed. There is no money in the budget for this. This year, the state budget allocates UAH 1.69 trillion for the security and defense sector. That is, almost all of the budget’s own revenues, which are planned in the amount of UAH 1.76 trillion.
“We have a war economy, there is definitely no money for some kind of cashback. I hope that in a few months everyone will forget about this and will not remember these initiatives, which, apparently, were invented on their knees,” says investment banker and financial analyst Sergei Fursa.
What effect is expected from the program?
In fact, the idea of the “Made in Ukraine” project arose in April 2023, during the Conference on the Restoration of Ukraine in Rome, says Deputy Minister of Economy Nadezhda Begun. There, representatives of the Italian Ministry of Economy enthusiastically talked about their “Made in Italy” initiative.
Ukraine and Italy have already agreed to promote the national brand “Made in Ukraine” on the European market with the support of Italian representatives of small and medium-sized businesses. Italian Minister of Enterprise and Production Adolfo Urso says that his country is ready to help Ukraine with specific initiatives for the formation and marketing of our products, to ensure that the “Made in Ukraine” brand captures the global consumer and encourages him to buy Ukrainian products.
To help domestic producers in Ukraine, according to Denis Shmygal, five tools are used:
Expand the categories of goods that the state buys from local producers. This will also apply to defense procurement.
Compensation - the budget includes UAH 1 billion to compensate 25% of funds for the purchase of Ukrainian-made agricultural equipment.
Adaptation of existing government programs to the goals of the “Made in Ukraine” platform. First of all, this applies to the “eVidnovlennya” programs, available loans “5-7-9%” and the like.
Grants under the eRobot program.
Stimulating consumer demand.
The total predicted effect from cashback is estimated at +0.14% of GDP, more than 22 thousand new jobs and more than UAH 4 billion in additional budget revenues.
***
It is difficult to say when the program will work at full capacity, especially the part that concerns cashback.
It is possible that it will not happen. Considering the problems with the allocation of aid to Ukraine from the United States, it is difficult to imagine senators who would be willing to allocate American taxpayers’ money for cashback for Ukrainians. In addition, in Ukraine itself there are more pressing needs that require financial support.
