Ukraine is looking for sources to cover another $20 billion in the defense budget shortfall. The total deficit is $27 billion, with the government planning to provide about $7 billion through savings, cost optimization, and reallocation of funds. The remaining amount is needed for drones, missiles, equipment, and other funds for the Defense Forces.
Prime Minister Sergei Koretsky said that Kiev is working with international partners on mechanisms to finance the shortfall. According to him, social spending will not be reduced. “There are no other sources, unfortunately“ he said regarding the proposed tax increase.
The government has committed to adopting 42 documents by October 15 related to receiving the promised international financial assistance. Koretsky also called on deputies to support the bills on which external financing depends.
VAT for the sake of a fund for business
The draft state budget of Ukraine for 2027 includes an increase in VAT by 1 percentage point. Koretsky explained that the funds will help create a special fund for insuring business against military risks.
Ukraine's initial contribution should be about $1 billion. Kiev expects international partners to increase the amount four times, so that the total fund reaches $5 billion. According to the prime minister, this will allow insurers to offer policies at affordable prices without the need for expensive reinsurance abroad.
Koretsky said that the current war risk insurance is difficult to access due to its high cost and slow payment of benefits. Under the proposed mechanism, businesses will be able to receive funds after damage is verified by rescue services.
New rules for international shipments
The Ukrainian government also supports the imposition of VAT on international shipments worth up to 150 euros. The Verkhovna Rada approved bills that provide for the change in first reading on September 16. It is a condition for the provision of $ 700 million under a program of the International Monetary Fund and 3.7 billion euros in a loan from the European Union.
According to Koretski, 80% of the cheap shipments were used to divide goods into small batches in order to avoid taxation. The new rules may enter into force no earlier than July 1, 2027 and after an additional decision by the government.
Latvia restricts access to weapons
Against this background, Latvia has finally adopted amendments that prohibit the issuance of weapons permits to citizens with dual Latvian and Russian or Belarusian citizenship.
The ban covers the acquisition, storage and carrying of firearms and powerful pneumatic weapons, as well as their collection. The law also creates a legal possibility to cancel permits already issued. The transitional rules allow the use of weapons under the old regime until December 1, 2026.
Separate conditions have been introduced for sports shooters. A person over 21 years of age, who has been a member of a shooting organization for at least a year and has at least a second sports rank, will be able to own up to 15 firearms or powerful pneumatic weapons.
Sources: Ukrainska Pravda, LSM, LETA