The Ukrainian parliament adopted a bill to increase taxes on 10 October, as the country struggles with its budget deficit in the face of Russia’s ongoing war.
The bill, passed in first reading on September 17, aimed to raise taxes by Hr. 58 billion ($1.4billion) in 2024, and Hr. 137 billion ($3.3billion) in 2025.
According to opposition legislator Yaroslav Zelezniak the version of bill approved by 247 members in the second hearing saw several changes.
A change to the legislation has left the military tax for military personnel – a sum collected from citizens to help support the war effort- at 1.5%.
The bill includes a provision that increases the military tax from 1.5% up to 5%.
Zhelezniak added that the current legislation is problematic from a legal standpoint. He said that another 10-page amendement that represented “half the law” had been removed.
The approved legislation increases military tax on individual incomes to 5% retroactively from Oct. 1, and on other individual incomes starting Jan. 1, 2025.
The tax also increases the profit tax on banks from 18% to 25 % in January 2024, and for other financial institutions it goes up to 50%.
Denys Shmyhal, the Prime Minister of Ukraine, said in August that Ukraine will face a budget deficit next year of $35 billion. However, foreign partners have committed to cover about $20 billion of this sum.
Kyiv is increasingly dependent on external sources of funding, such as grants, loans, and other forms of assistance from the EU, U.S.A., International Monetary Fund, and other partners, as the Russian war continues to place heavy strains on the country’s economic system.
The proposed tax hike is part of a larger effort to find new sources of funding in the country, which could also include increased domestic borrowing as well as measures to boost wages and employment.
The bill has been criticized despite the dire budgetary situation because of its potential impact on the already difficult living conditions within the country.
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