Government Proposes First Tax Increase In War Period For Defense Funds

Ukrainian Military/PHOTO via Instagram @zelenskyy_official

JAKARTA - The Ukrainian government is proposing an increase in the first tax during the war to raise billions of dollars in new funds for weapons and military salaries as the war with Russia approaches 29 months.

At his weekly meeting, the government approved a draft amendment to the 2024 budget law, which increased defense spending by 495.3 billion hryvnia (USD 11.9 billion), government officials and lawmakers said.

To date, Ukraine is targeting defense spending of around 1.7 trillion hryvnia by 2024. The changes still need to be supported by parliament and signed by President Volodymyr Zelenskiy before they take effect.

The government also proposes an increase in taxes and other duties, ranging from war taxes paid by residents to the implementation of additional duties on several imports and increasing fuel customs.

"The full-scale war is now entering its third year, and the need in the security and defense sector is increasing," the Ministry of Finance said.

"To finance our resistance to aggressors, we can only rely on our own resources and the main thing is domestic taxes and loans. This will ensure our safety and bring our victory closer," the ministry added.

The ministry said the proposed change was the softest option to finance additional military needs, adding that only about a third would be borne by tax increases.

Kyiv's defense spending continues to increase as the government launches new efforts to strengthen mobilization efforts and send more new troops to the forefront. Ukraine is also focused on building the domestic weapons production industry.

To be able to distribute more funds to the army, the government proposed various tax increases, planning to raise an additional revenue of 140 billion hryvnia.

The government asked parliament to consider an increase in war taxes for individuals to 5% from the current 1.5 percent.

The draft proposal published by several lawmakers shows the government plans to expand the number of eligible businesses to pay war taxes to include individual entrepreneurs and micro and small businesses.

The ministry also plans to raise around 362 billion hryvnia from its efforts to reduce shadow economy and from the domestic debt market.

The government also wants to cut the 2024 budget expenditure plan by 65.7 billion hryvnia, including by saving money on foreign debt payments.

Roksolana Pidlasa, chairman of the parliamentary budget committee, said lawmakers would consider the amendment in the near future.

For social and humanitarian spending, the government relies on international financial assistance. The country received about 89 billion US dollars from its Western partners in financial aid since the start of the Russian invasion in February 2022.