Ukraine parliament approves 1st wartime tax hikes
What's the story
Ukraine's parliament, the Verkhovna Rada, has approved the country's first major wartime tax hikes.
The move is intended to strengthen the nation's finances as it continues to battle Russia in a long-drawn conflict.
Yaroslav Zhelezniak, a lawmaker from the Holos party, confirmed that 247 out of 450 deputies in the Verkhovna Rada had voted in favor of the hikes.
Defense funding
Tax hikes to fund Ukraine's defense spending
The finance ministry also revealed that Ukraine spends most of its revenue on its military expenditure.
The current tax level has not been enough to cover rising defense costs, which have increased since Russia's full-scale invasion in February 2022.
To balance its budget in the coming year, Ukraine continues to depend heavily on foreign financial aid.
Fiscal challenges
Ukraine's budget deficit and new tax law details
Since the start of Russia's invasion, Ukraine has received nearly $100 billion in Western economic aid. The assistance is essential to meet expenses like pensions, public sector wages, and other social spending.
However, Kyiv needs another $12 billion by the end of 2024 for defense. The expected budget deficit for next year is about $38 billion.
Tax adjustments
New tax law to increase war tax, affect small businesses
The newly approved law also includes a rise in war tax from 1.5% to 5% for residents, higher taxes for individual entrepreneurs and small businesses, a 50% tax on banks' profits, and a 25% tax on the profits of financial companies.
Iryna Geraschenko, a lawmaker from the opposition European Solidarity party, said that these new taxes would apply retroactively from October's start.
Economic measures
Ukraine's debt restructuring and domestic borrowing
The exact amount of additional revenue to be generated from these tax hikes remains uncertain.
This is because several amendments introduced during debates—held behind closed doors for wartime security reasons—remain unknown.
The legislation now awaits President Volodymyr Zelenskiy's signature to become law.
Meanwhile, the government has increased its domestic borrowing and restructured Ukraine's foreign debt, potentially saving $11.4 billion over three years.