Ukraine’s Vladimir Zelensky signed into law an unpopular tax increase on Thursday to help remedy the country’s growing budget deficit. The relevant document was published on the website of the country’s parliament, the Verkhovna Rada.
The bill, which has drawn sharp criticism from the opposition and the public, was approved by parliament in October.
The first major hike since the escalation of the conflict with Russia will see individuals pay between 1.5% and 5% more of their incomes. A ‘war tax’ is also being introduced for entrepreneurs and small businesses.
The new law also sets a 50% rate on bank profits, and a 25% tax on financial companies, among other measures.
The changes will take effect from December 1.
Yaroslav Zhelezniak, deputy chair of the parliamentary committee on finance and tax policy, called the hike “historic,” criticizing the delay in its signing. According to the Ukrainian constitution, the law must be signed within 15 days or vetoed.
Zhelezniak wrote on Telegram: “After dragging it out for 44 days …, [Zelensky] signed a historic tax increase. You may ask why they delayed it if they signed it anyway. … I don’t know. No one knows. Simply and without logic.”
He claimed that every single day the measure is put off costs the national budget 270 million hryvnias ($6.4 million). “These 44 days of delay mean minus 12 billion hryvnias ($288.3 million) from the army budget,” he calculated.
Back in October, opposition lawmakers condemned the proposed law on tax increases as “a shameful decision.” Aleksey Movchan, a member of Zelensky’s party, acknowledged that the bill was “unpopular,” and that lawmakers will be “hated” for approving it.
Finance Minister Sergey Marchenko said on Thursday that the bill was vital to ensure smooth funding for the Ukrainian defense sector next year.
Ukraine’s defense spending accounts for about half of the country’s annual budget, the minister said. The government has put next year’s military spending target at about 2.2 trillion hryvnias ($53 billion), roughly the same level as this year.
In addition to the tax increase, Zelensky on Thursday also signed into law a bill on the state budget of Ukraine for 2025 envisaging expenditures of $87 billion and revenues of $49 billion, which will also post a massive overall shortfall of $37 billion.
The approval of tax increases was critical for Ukraine’s financial program with the country’s key lender, the International Monetary Fund, according to Marchenko.
Kiev plans to cover the deficit with financing from the IMF and the EU, as well as with funds from a $50 billion G7 loan backed by frozen Russian assets.