Increasing taxes in Ukraine is a necessary step. This decision will affect business, but other options have been almost exhausted, said Finance Minister Serhiy Marchenko at the discussion "Tax increase and the new social contract" held by the New Country project of LB.ua and EFI Group.
Since the beginning of the war, Ukraine has significantly increased its domestic borrowing. The state has now reached a point where domestic borrowing does not create new expenditures.
"They just feed the system. That is, all you borrow is to repay the payments made and service these payments," the minister explained.
In addition, Ukraine has an obligation under the IMF programme to maintain debt sustainability within the framework of the programme, which implies stability of the debt market.
Another option is external borrowing. For this year, $41.3 billion will be raised from partners, and the expected amount for next year is $38.4 billion. However, this does not mean that payments will be stable.
"In the first quarter of this year, we had only 10% of the required amount of foreign aid. And this is a fact that must be taken into account," Marchenko stressed.
Another option is to revise expenditures. They are not ready to optimise military spending.
Raising taxes in Ukraine
- This year, Ukraine lacks UAH 500 billion to finance the army. It is not possible to get these funds from international partners, so it was decided to raise taxes. In July, the government proposed a bill to that effect. The relevant committee of the Verkhovna Rada developed an alternative one, which was put to a vote. The first attempt to pass it failed, as it lacked two votes.
- However, in the end, the Verkhovna Rada approved in the first reading a draft law on tax increases necessary for the needs of the army. It provides for an increase and expansion of the military tax for private entrepreneurs, a 50% tax on profits for banks this year, an expansion of the range of potential investors to whom the state is willing to sell, and the possibility of selling any state-owned stake in a bank, not just 100%.
- According to the Prime Minister, four steps have been developed to find additional budget revenues. One of them is the so-called economic reservation, or, as the government called it, the "fight or work" principle.