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Forbes: Ukraine considers raising banks' income tax for 2023 amid budget fears

by Martin Fornusek November 14, 2023 11:34 AM 2 min read
The logo of the Ukrainian state-owned Oschadbank is seen at one of its branches in Lviv on Nov. 3, 2021. (Mykola Tys/SOPA Images/LightRocket via Getty Images)
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Ukrainian authorities are considering retroactively raising taxes for banks' surplus profits to over 50% for 2023, as worries about the next year's budget grow, Forbes reported on Nov. 13, citing undisclosed sources.

The plan, proposed by the Finance Ministry and backed by Ukraine's central bank and the International Monetary Fund (IMF), could bring further Hr 24 billion ($663 million) to the 2024 budget, Forbes reported.

Additional finances are especially vital now as agreements on financial aid from the U.S. and the EU have not yet been finalized.

The Ukrainian parliament approved in the first reading on Oct. 19 a draft law increasing the income tax for banks from 18% to 36% during the 2024-2025 period, hoping to raise an additional Hr 10 billion ($276 million) in state revenues per year.

However, authorities worry that this financial boost may not be enough and therefore look to tax as much as 52%-54% of the banks' profits in their "mega-successful" year 2023, though the exact rate is still being decided, Forbes reported.

The proposal was rejected in the parliament earlier, with lawmaker Yaroslav Zhelezniak saying that taxes "cannot be introduced retroactively."

Growing budget anxieties have seemed to convince officials that cutting some corners may be necessary.

"We have no choice, everything is very difficult with finances," a member of the parliamentary finance committee told Forbes.

The authors of the plan reportedly also considered changing the taxation for the following years. The 36% tax rate for the next two years may replaced by a 25% rate on a more long-term basis, the sources told Forbes.

The parliament passed the state budget for 2024 on Nov. 9, setting revenues at Hr 1.77 trillion ($49 billion) and expenses at Hr 3.35 trillion ($93 billion). Almost half of the budget was allocated to defense needs.

Russia's ongoing war made Ukraine more reliant on foreign aid. Support from the leading donors – the U.S. and the EU – is currently being stalled by internal political infighting.

While the EU's $53 billion in financial assistance is being stalled by Hungary, future U.S. support faces challenges from the hard-line faction of the Republican Party.

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