Ukraine's government has proposed its first wartime tax hike, through which wants to raise new funds for weapons and salaries for military personnel, as the war with Russia has been going on for almost 29 months, Reuters reported, quoted by BTA.
At its weekly meeting, the government in Kyiv approved draft changes to the 2024 state budget law, increasing defense spending by 495.3 billion hryvnias ($11.9 billion), government officials and Ukrainian lawmakers said.
Ukraine has so far pledged about 1.7 trillion hryvnias in defense spending for 2024. The changes still need to be voted on by parliament and signed by President Volodymyr Zelensky before they take effect.
The government has also proposed an increase in taxes and duties. This concerns the military tax paid by Ukrainians, as well as the imposition of additional duties on some imported goods, along with an increase in excise duties on fuels.
"The full-scale war is now in its third year and needs in the security and defense sector are growing," Ukraine's finance ministry said in a statement.
"To finance our resistance against the aggressor, we can rely only on our own resources, the main ones being (receipts from – ed.) taxes and internal loans. This will guarantee our safety and bring victory closer," the Ukrainian ministry believes.
The proposed changes are the "softest possible option" to finance Ukraine's additional military needs, only about a third of which will be covered by the tax hike, according to the finance ministry.
To be able to direct more funds to the military, the government has proposed various tax increases, planning to raise additional revenue of 140 billion hryvnias.
Currently, separate from the Personal Income Tax, citizens of Ukraine pay a 1.5 percent military tax on all their monetary income. The government asks the parliament to consider increasing the military tax to 5 percent.
The draft proposals also provide for the expansion of the number of enterprises that meet the conditions for paying the military tax, so that it also covers individual entrepreneurs and micro and small enterprises.
The ministry also plans to raise about 362 billion hryvnias from its efforts to reduce the shadow economy and from the domestic debt market.
The Ukrainian government is also seeking to reduce planned budget spending for 2024 by 65.7 billion hryvnias, including through savings on external debt payments.
Roksolana Pidlasa, chairwoman of the budget committee in the parliament of Ukraine, said that lawmakers will consider the amendments in the near future.
For social and humanitarian expenses, the Ukrainian government relies on international financial aid. It has received about $89 billion from its Western partners in financial aid since the start of the Russian invasion in February 2022.