ALBAWABA - In an effort to address the mounting budget imbalance that has arisen as a result of the skyrocketing military expenses of the country, the Ukrainian parliament voted on Thursday to approve the country's first substantial tax hike since the beginning of Russia's invasion.
This crucial step comes at a time when Ukraine continues to shoulder the financial pressure of the continuing war, that has wrecked the economy and increased the government's dependency on Western assistance, which according to Reuters has topped $100 billion so far.
Among the several tax increases enacted by the new law are a 25% tax on financial firms, a 50% tax on bank earnings, and a war tax increase on civilian salaries from 1.5% to 5%. These measures are expected to produce an extra 141.1 billion hryvnias ($3.4 billion) in 2025 and 23.2 billion hryvnias ($563 million) in 2024, according to the Finance Ministry.
The government is still expected to have a budget deficit of about 38 billion dollars for the next year, despite the efforts that have been made, and the assistance that comes from other countries is playing a crucial part in covering the gap.
With almost 60% of the state budget going toward military spending, marking a third of the country’s GDP as AFP reports, and the conflict showing no signs of ending, Kyiv will need an extra $12 billion by the end of 2024 to meet its defense requirements. In the meanwhile, the economy is struggling with growing inflation, which increased from 7.5% in August to 8.6% year over year in September 2024.
40 parliamentarians voted against the tax reforms, 11 abstained, and 247 MPs supported them. Oleksiy Goncharenko and other opposition figures attacked the tax burden on average citizens, claiming that it unjustly affects all working Ukrainians, including physicians, teachers, and other vital professions.
The additional taxes will go into effect retrospectively from the beginning of October, Reuters reports citing Iryna Geraschenko, a politician from the opposition European Solidarity party. However, President Volodymyr Zelenskiy must still approve on the legislation before it can take effect.
