The need to increase taxes in Ukraine to fill the budget is due to two main problems — hopes regarding the results of the autumn counter-offensive of the Defense Forces were not fulfilled and the adoption of the aid package from the United States was significantly delayed.
This was stated by senior economist of the Center for Economic Strategy Yuri Gaidai in a commentary to Facts ICTV.
Two main reasons for raising taxes
— It was obvious at the beginning of the year that there would be a need to further finance expenses. There are two main problems here, although in reality there are more. First Problem — the budget had been prepared since the middle of last year, and then the main assumption was that there would be a certain result of the autumn counter-offensive. Accordingly, from the second half of 2024, a decrease in combat activity and defense spending was expected, — explained the expert.
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According to him, international partners had the same expectations; planning for external support for Ukraine was based on them.
The second problem Gaidai said that the aid package from the United States was very delayed, so at the beginning of the year the government was forced to actively spend funds, more than planned.
— Accordingly, we see that more was used than was allocated for the corresponding period for defense, and this week Finance Minister Marchenko said that his estimate of this gap is about $5 billion, that is, 200 billion UAH. This is what we do not have enough for either our revenues, external financing, or additional internal borrowings, that is, through bonds, — noted economist.
Gaidai pointed out that there is still a third component — if we want to carry out a full mobilization, “then these are additional costs and at least another $5 billion”.
— Hence this estimate of the gap from 200 to 400 billion UAH, which must be found somewhere. And it is clear that tax increases — This is a bad decision, but today I don’t see how you can do without it. The authorities also delayed this conversation as much as possible, but now it is already obvious that it is impossible to delay any longer, — the expert believes.
VAT, military duty, excise taxes: what taxes can be increased
There is not a single document on tax initiatives yet, however, as Gaidai noted, discussions are being held around value added tax (VAT) and military duty.
— With VAT, the story is the simplest — it is a tax that is easy to administer. That is, you increased it and receive income, which, for example, would not happen with income tax, because there is complex accounting, there must be tax audits to find out whether it is paid properly. Therefore, here the government chooses those instruments that it expects will most easily bring funds, — he explained.
In his opinion, there are also no problems with excise taxes on fuel — they will quite confidently bring in funds, especially given the fact that fuel networks have been quite actively being shadowed over the past six months through the efforts of the tax authorities.
— The military tax is actually the most counter-conversionary for me, since such a 5% military tax for single tax payers in the 3rd group will essentially double the tax burden on them to 10% of turnover. This is a lot for certain industries and types of activities, — Gaidai believes.
Under such conditions, some entrepreneurs will be able to pay this 5% relatively easily, and for others this will be an additional incentive to either go into the shadows or switch to a general taxation system, the expert adds.
— Here's 10% of turnover — This is already more than many system-wide employees pay, so it would be difficult to model here what revenues should actually be. We expected that this would bring in somewhere up to 33 billion in military revenue in annual terms, in fact, from the simplified ones, but how much it would actually be is difficult to say, — says the economist.
In his opinion, it would also be advisable to extend the military tax on transactions to operations that can be called the consumption of luxury goods, primarily to jewelry, to the purchase of a car above a certain value threshold, to real estate, which was discussed in the Ministry of Finance at the end of last year .
— It can be expected that the military tax will concern its increase to 5% for all employees and single tax payers under the simplified system. But I’m not sure that it will be a 5% rate, because it may push many to switch to a common system, or to go into the shadows. But it's worth waiting for the bill, — Gaidai summed up.
Getmantsev on the need to increase taxes
The day before, the head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, Daniil Getmantsev, announced the need to find additional sources of funding for the army, so the government will be forced to increase basic taxes, in particular VAT, military taxes on salaries and excise taxes.
— We need to increase both the expenditure and revenue sides of the budget to finance the army, which we finance from our internal sources. We cannot borrow these funds from partners, — emphasized the people's deputy.
According to him, the government is now calculating the needs and the required amount, but it will not be less than 300 billion UAH by the end of the year, and filling the budget cannot be ensured without avoiding basic taxes.
— Therefore, the changes will concern budget-forming direct and indirect taxes, in particular VAT, military duties and excise taxes, — added Getmantsev.
