Ukraine to raise taxes to finance war against Russia

Tax increases now under discussion in the parliament in Kiev are essential if Ukraine is to repel the Russian invasion launched in 2022, Finance Minister Serhiy Marchenko said on Friday.

"Tax increases in Ukraine are a necessary step," the minister said at an event in the capital. "This decision will affect business, but other options have been almost exhausted."

The country could no longer finance new expenditure by issuing domestic bonds, as these revenues were only sufficient to service old bond debts, Marchenko underlined.

Moreover, foreign financial aid is becoming increasingly uncertain, the state news agency Ukrinform cited Marchenko as saying. In the first quarter of 2024, Ukraine received only around 10% of the foreign aid it needed, according to the minister.

At the time, a blockade by the Republicans in the US Congress had delayed the provision of money for Ukraine for several months.

Nevertheless, Kiev is still counting on foreign loans and aid money to sustain the war effort and other essential spending.

"For this year, $41.3 billion will be raised from partners, and the expected amount for next year is $38.4 billion. However, this does not mean that the payments will be stable," Marchenko said.

In mid-September, the parliament in Kiev passed in the first reading a tax bill to raise the equivalent of $1.4 billion for defence spending this year and more than $3.3 billion in 2025.

Among other taxables, the bill increases the war tax, which was introduced in 2014 and is payable on income, from 1.5% to 5%. The second and final reading is still pending.

According to the Ministry of Finance, Kiev has since the full-scale invasion received the equivalent of over $98 billion in budget support from abroad.