Ukrainian legislators consent ‘unpopular’ tax increase
Date
10/13/2024 6:50:40 AM
(MENAFN) In a significant move reflecting the country's ongoing economic challenges, Ukraine’s parliament has approved its first major tax increase since the onset of the conflict with Russia in 2022. The decision comes as the budget deficit continues to widen, prompting lawmakers to implement measures aimed at boosting revenue.
On Thursday, the lower house passed a draft law that has drawn considerable backlash from both the opposition and the public. Key provisions of the law include increasing the war tax paid by residents from 1.5 percent to 5 percent, imposing a 50 percent tax rate on bank profits, and establishing a 25 percent tax on financial companies. These changes are intended to generate substantial revenue for the national budget.
According to the Finance Ministry, these new levies are projected to contribute approximately USD563 million to the national budget this year, with expectations of around USD3 billion in 2025. Prime Minister Denis Shmygal previously indicated that Ukraine requires an additional USD15 billion to address its budget deficit, which is forecasted to reach USD35 billion next year. The government is also anticipating around USD20 billion in assistance from the European Union and the International Monetary Fund (IMF) in 2025.
Yaroslav Zhelezniak, the deputy chair of the parliamentary committee on finance and tax policy, described the tax increase as a “historic” step for the country. However, the response from opposition lawmakers has been vehemently negative, labeling the decision as “shameful.” Even within Zelensky’s party, some members have recognized the unpopularity of the bill, with Aleksey Movchan admitting that lawmakers will likely face public resentment for their vote.
Residents of Kyiv have also expressed strong opposition to the tax increase. In comments reported by The New York Times, locals voiced concerns over their already strained financial situations. One store worker articulated the widespread dissatisfaction, stating, “We’ve all been struggling financially for a long time, and now we’ll lose even more of our salaries and income. There’s a lot of concern and dissatisfaction.”
As Ukraine grapples with the dual challenges of ongoing conflict and economic instability, the approval of this tax hike highlights the difficult choices faced by its leaders in securing necessary funding while managing public sentiment.
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