Zelensky signs law on 'historic' tax increase
President Volodymyr Zelensky signed into law a bill authorizing a major tax increase on Nov. 28, following more than a month of delay.
The bill, which was passed by the Ukrainian parliament on Oct. 10, will raise taxes by Hr 8 billion ($192 million) in 2024 and Hr 141 billion ($3.4 billion) in 2025, lawmaker Yaroslav Zhelezniak said, as the country struggles to shore up its budget deficit amid Russia's ongoing full-scale war.
The law is expected to come into effect on Dec. 1.
One of the provisions of the bill is an increase of the military tax — a sum levied from citizens to support the war effort — from 1.5% to 5%.
An amendment to the legislation left the military tax for military personnel at 1.5%.
The bill also introduces a military tax for self-employed persons and increases profit taxes for banks to 50% for 2024 and other financial institutions from 18% to 25% since January next year.
Zelensky also signed a bill on the state budget for 2025, passed by the parliament on Nov. 19.
All taxes of citizens and businesses will be directed to Ukraine's defense and security, according to Prime Minister Denys Shmyhal.
The state expects to get Hr 2 trillion ($48.2 billion) in revenues, while expenditures are planned at Hr 3.6 trillion ($86.8 billion) in 2025. The budget envisages spending Hr 2.2 trillion ($53 billion) on Ukraine's defense, which is 26.3% of the country's projected gross domestic product (GDP).
Shmyhal said in August that Ukraine faces a budget deficit of $35 billion next year, though foreign partners have pledged to cover roughly $20 billion of that sum.
The proposed tax increase is part of an effort to find additional sources of funding at home, which may also include increased domestic borrowing and measures to boost the number of jobs and wages.
Despite the dire budgetary situation, the bill has received criticism due to its potential repercussions on already difficult living conditions in the country.
