The government is considering introducing new taxes to finance defense needs

The Cabinet of Ministers and representatives of the Verkhovna Rada's specialized committees are discussing a plan to increase budget revenues by 0.5% of GDP, which Ukraine is to present as part of a program with the International Monetary Fund, Ekonomichna Pravda reports. The plan envisages the introduction of a number of new taxes. This is stated in thearticle of the EP.

Thus, according to EP's interlocutors, as part of the IMF program, the government plans to introduce additional taxation in the form of a 0.1% military tax on corporate profits and income of individual entrepreneurs, 1.5% on the cost of precious metals, 30% on the cost of jewelry, and 10% on the cost of movable property. The possibility of additional taxation of real estate transactions and the introduction of an additional tax on certain other transactions is also being considered.

At the same time, even the introduction of these new taxes cannot cover all additional budget needs, as the total fiscal effect of these taxes will be only about UAH 40 billion. According to the EP's sources in the Parliament, the needs of the defense sector currently amount to more than UAH 400 billion - and this is if the government does not conduct additional mobilization and the United States agrees on an aid package for Ukraine that includes direct budget support.

In order to raise more than UAH 400 billion, the government is currently considering raising the rates of major taxes, namely VAT and military duty (on personal income).

"One percent of the VAT rate costs the budget 35 billion hryvnias, and one percent of the military fee costs 27 billion hryvnias. So, do the math and see how we can cover our needs," says an EP source in the government involved in the search for additional sources of budget revenues.

Based on such arithmetic, to cover the need for more than UAH 400 billion, the authorities need to raise VAT and military duty rates by about 6-7%.

Another way to increase domestic budget revenues is to expand the potential of the domestic government bonds market. However, the potential of this instrument is extremely limited, as the economy has almost reached its sustainable capacity to lend to the government.

Yaroslav Vinokurov