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Publication date: 14.05.2024
According to the Cabinet of Ministers of Ukraine, the country is planning a significant increase in basic taxes. The Ministry of Finance of Ukraine is currently working on the amendments, which will soon be submitted to the Parliament.
Currently, it is planned to increase personal income tax and military duty, which is currently paid at the rate of 18 percent of one's salary on income (personal income tax), as well as 1.5 percent of military duty. Thus, the total tax burden is 19.5 percent. The personal income tax is distributed between the state and local budgets, while the military fee goes directly to the state budget and is used for the defense industry.
After the increase, the military tax will be 5 percent. It is proposed to increase the military tax so that all the funds collected go to defense, not to local budgets, and the question is not whether this step is popular or unpopular. It is necessary to protect the state," the government said.
Thus, if now a Ukrainian with a salary of UAH 10,000 pays UAH 1,950 in tax, after the changes its amount will increase to UAH 2,300. The total income tax will be 23 percent.
Currently, employed Ukrainian citizens pay a value added tax of 20 percent. VAT is paid by businesses, but this amount is reflected in the price tags of all goods. No final decision has been made on how the tax rate will be increased. Two options are being considered: 2 percent or 3 percent.
It is not yet known what the budget deficit will be and how much money will be missing for defense. It is likely to be about UAH 400 billion. A 2 percent VAT increase could add about UAH 70 billion to the state budget, and a 3 percent increase could add more than UAH 100 billion.
The Cabinet of Ministers is also analyzing the inflation situation and business opportunities. The increase in the military tax is expected to add UAH 94 billion to Ukraine's budget.
In order to raise more than 400 billion hryvnias, the government is currently considering raising the rates of major taxes, namely VAT.
"One percent of the VAT rate costs the budget 35 billion hryvnias. So you can calculate how we can cover our needs," said a government source involved in the search for additional sources of budget revenue.
Based on this arithmetic, to cover the need for more than UAH 400 billion, the authorities need to raise VAT rates by about 6-7 percent.
Another way to increase domestic budget revenues is to expand the potential of the domestic government bonds market. However, the potential of this instrument is extremely limited, as the economy has almost reached its sustainable capacity to lend to the government.
In search of possible sources of additional funds, the authorities are coming up with rather exotic ideas. One of the latest is the so-called economic reservation. The idea is to allow companies to reserve their workers from mobilization for a certain amount of taxes paid. Due to the fear of a split in society along property and gender lines, there are almost no people in the Verkhovna Rada willing to support any of the economic reservation initiatives.
We would like to remind you that the number of individual entrepreneurs has increased significantly in our country. In the first quarter of 2024, our compatriots opened almost 74 thousand businesses, which is 33.6 percent more than in the same period last year.
Thus, we see that the amendments adopted not only to the current law are adopted taking into account changes in the requirements of the times and the imposed martial law in Ukraine, but also in relation to business activities in accordance with the fact that a legal analysis of the situation, analysis of documents and verification of documents by a lawyer and a legal opinion were carried out.
