Ukraine's Verkhovna Rada failed on Tuesday to adopt legislative changes to tax goods in international shipments, which are among the commitments made by Kiev to receive further tranches of financial assistance from the International Monetary Fund (IMF) and the European Union, reports "Reuters".
The bill received 194 votes, with at least 226 needed for its passage. It was not immediately clear how many deputies voted against and how many did not participate in the vote.
The unsuccessful vote comes at a time when an IMF mission is in Ukraine to review the implementation of the country's financing program.
Prime Minister Serhiy Koretsky warned deputies before the vote that Ukraine faces a shortfall of about $27 billion in financing its defense needs and called on parliament to accelerate the adoption of the reforms agreed with international partners.
According to him, Kiev can and should receive about $30 billion from its international partners this year, but on condition that it fulfills its commitments.
"Not all the decisions that we agreed with our partners have been taken and our obligations to them have not been fully fulfilled. If these issues are not resolved, the country could face significant financial risks," warned Koretsky.
Currently, goods in international shipments worth up to 150 euros are exempt from taxation in Ukraine. The proposed reform envisages the elimination of VAT exemption for commercial goods purchased from foreign online stores and platforms, including when their value is less than 150 euros.
According to the Ukrainian Ministry of Finance, the change would provide about 10 billion hryvnia, or approximately $228 million, in additional budget revenues annually. The government says the funds are needed for the security and defense sectors.
At the same time, it is planned to maintain the tax exemption for non-commercial shipments between individuals worth up to 45 euros, as well as for certain personal items in unaccompanied luggage worth up to 150 euros.
The Ministry of Finance also argues for the reform with the need to eliminate the unequal conditions between Ukrainian traders and foreign online platforms. According to the ministry, the current system also allows tax avoidance by artificially dividing large commercial deliveries into many small shipments below the tax-free threshold.
The removal of the tax exemption for international shipments is listed as a structural commitment in Ukraine's program with the IMF. The fund says the measure should close an existing tax loophole and restrict some non-essential consumer imports.
The chairman of the parliamentary committee on finance, tax and customs policy, Danilo Hetmantsev, said after the vote that the cost of failure could reach about 4 billion euros in potential financing from the EU and the IMF.
"Reuters" notes that it is not clear on what calculations Hetmantsev based this amount, since the size of the next tranches is yet to be determined as part of the program review.
"Financial catastrophe is not just around the corner. It is already in the room," Hetmantsev wrote on Telegram after the vote.
The proposal is causing serious controversy in the Verkhovna Rada. Some lawmakers warn that taxing cheap purchases from abroad will increase the costs of Ukrainian households, which are already suffering the economic consequences of the ongoing war. Supporters of the reform argue that it will increase budget revenues and improve the competitive position of Ukrainian manufacturers and traders vis-à-vis foreign online platforms.
Financial pressure on Ukraine continues to mount as war costs increase and damage to the economy and infrastructure from Russian attacks increases.
The IMF in July completed the first review of Ukraine's new four-year program and approved the disbursement of about $690 million, bringing total disbursements under it to approximately $2.2 billion. However, the fund noted delays in implementing some of the agreed structural reforms and stressed the need to increase domestic budget revenues.
The failed vote in the Verkhovna Rada also comes against the backdrop of intensified Russian attacks on Ukrainian cities and infrastructure. On Tuesday, Kiev was subjected to Russian attacks for the sixth consecutive day.