Ukraine's parliament approves 'historic' tax hike.
The Ukrainian parliament on Oct.
10 adopted a bill on a major tax increase as the country struggles to shore up its budget deficit amid Russia's ongoing full-scale war. The bill, which was passed in the first reading on Sept.
17, aimed to increase taxes by Hr 58 billion (£1.4 billion) in 2024 and Hr 137 billion (£3.3 billion) in 2025. According to opposition lawmaker Yaroslav Zhelezniak, the version of the bill approved by 247 lawmakers in the second reading saw several changes.
An amendment to the legislation left the military tax - a sum levied from citizens to support the war effort - for military personnel at 1.5%. One of the provisions of the bill is an increase in military tax from 1.5% to 5%. In turn, another 10-page amendment that represented "half of the law" was removed, Zhelezniak said, saying that the legislation in its current form is problematic from the legal point of view.
The approved legislation increases the military tax on individuals' income to 5% retrospectively since Oct.
1 and on other individuals' incomes since Jan.
1, 2025. It also introduces a military tax for self-employed persons and increases profit taxes for banks to 50% for 2024 and other financial institutions from 18% to 25% since January next year. Prime Minister Denys Shmyhal said in August that Ukraine faces a budget deficit of £35 billion next year, though foreign partners have pledged to cover roughly £20 billion of that sum.
Kyiv has grown increasingly reliant on external sources of financing, such as grants and loans from the EU, the U.S., the International Monetary Fund (IMF), and other partners as Russia's war continues to put heavy strain on the country's economy. The proposed tax increase is part of an effort to find additional sources of funding at home, which may also include increased domestic borrowing and measures to boost the number of jobs and wages. Despite the dire budgetary situation, the bill has received criticism due to its potential repercussions on already difficult living conditions in the country.
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