Ukraine’s government is facing significant pushback from domestic and international businesses over its proposal to increase taxes to finance the ongoing war effort, reports Politico.
The draft tax law, introduced to the Ukrainian parliament in July, aims to raise 120 billion hryvnia ($ 3 billion) in additional revenue.
While the government argues the tax hike is necessary to support defense capabilities, it faces strong opposition from domestic and international businesses who warn of potential economic instability. The debate underscores the challenges Ukraine faces in balancing its urgent military needs with maintaining a stable economic environment for businesses.
“The war has been going on for the third year, and the government has been doing everything possible not to raise taxes for business. Today, all other sources for increasing the funding of the defense forces have already been exhausted,” Ukrainian Finance Minister Serhii Marchenko said.
However, the Ukrainian Chamber of Commerce strongly criticized the move, arguing that “the search for additional revenues through the introduction of new taxes will greatly burden business.”
The chamber further warned that “additional fiscal pressure on Ukrainian business makes economic stability impossible” given the current challenges faced by companies due to Russian aggression.
International actors have also weighed in on the issue. Penny Pritzker, the US special representative for Ukraine’s economic recovery, suggested alternative approaches during a briefing in Kyiv.
“The United States is encouraging the Ukrainian government to increase revenues primarily by reforming customs and combating gray markets,” Pritzker said.
The American Chamber of Commerce in Ukraine echoed this sentiment, urging the government to focus on combating tax evasion and ensuring equal rules for all businesses rather than increasing taxes on legitimate taxpayers.
Despite a meeting between the government and business representatives on 31 July, no agreement was reached. Prime Minister Denys Shmyhal described the meeting as “the beginning of a dialog,” while Danylo Hetmantsev, chairman of the parliament’s tax committee, maintained that a tax hike was “painful but necessary.”
The Ukrainian government argues that it needs to increase revenues by 500 billion hryvnia ($ 12,2 billion), with $3 billion coming from new taxes. According to Politico, Ukraine allocated nearly $40 billion, or about 37 percent of its GDP, to defense this year.
Finance Minister Marchenko emphasized the urgency of the situation, stating that a decision on the tax hike should be made by September.
“The issue of providing these funds is an absolute necessity. The state’s defense capability depends on it,” he said.
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