The Ukrainian parliament has recently approved the country’s first major tax increase since the start of the conflict with Russia in 2022, as the budget deficit continues to grow. This decision, which has faced criticism from opposition parties and members of the public, was passed by the lower house on Thursday.
The draft law proposes a range of new measures, including an increase in the war tax paid by residents from 1.5% to 5%, a 50% tax rate on bank profits, and a 25% tax on financial companies, among others. The Finance Ministry expects these new levies to contribute approximately $563 million to the national budget this year and around $3 billion next year. Ukrainian leader Vladimir Zelensky is expected to sign off on the new measures later this month.
In August, Prime Minister Denis Shmygal stated that Ukraine needed an extra $15 billion to cover its budget deficit, which is projected to reach $35 billion next year. The premier also mentioned that Kiev expects to receive $20 billion from the EU and the International Monetary Fund (IMF) in 2025.
Yaroslav Zhelezniak, deputy chair of the parliamentary committee on finance and tax policy, called the measure a “historic tax increase.” However, opposition lawmakers have condemned it as “a shameful decision.” Aleksey Movchan, a member of Zelensky’s party, acknowledged that the bill was “unpopular,” and that lawmakers will be “hated” for approving it.
Several residents of Kiev spoke to The New York Times on Thursday, expressing their strong opposition to the tax increase. One store worker said, “We’ve all been struggling financially for a long time, and now we’ll lose even more of our salaries and income. There’s a lot of concern and dissatisfaction.
Another significant concern among Ukrainians is that revenue generated by the new taxes could end up in the pockets of corrupt officials. High-profile graft scandals have recently plagued the country. Solomiia Bobrovska, an opposition lawmaker and member of the parliamentary defense and intelligence committee, told The New York Times, “There is no trust that the state will properly use the money.
An advisor to Zelensky, who spoke to Time magazine in October last year under the condition of anonymity, revealed that people in Ukraine “are stealing like there’s no tomorrow.” In contrast, Foreign Minister Dmitry Kuleba has insisted that reports of widespread corruption are untrue.