Ukraine’s parliament approves new tax hike bill in first rading

Source: Yaroslav Zheleznyak/Telegram

Big changes could be on the way for taxpayers in Ukraine after the country’s parliament backed a new tax hike bill in its first reading on Tuesday. The measure is projected to bring in additional 58 billion hryvnias in revenue this year alone, and  massive 137 billion hryvnias next year. The bill No. 11416-d  received support from 241 MPs and is now moving to its next stage.

If green-lit in its final reading, taxpayers and businesses will have to deal with the following changes:

• The military tax will jump from 1.5% to a hefty 5%.
• Small businesses known as FOPs won’t escape either.  Business community in categories 1, 2, and 4 will be hit with a 10% military tax.
• Those in category 3 will see a 1% tax on their earnings.
• Advanced payments are coming into play for fuel retailers.
• Non-bank financial institutions will have to pay 25% profit tax.
• Banks will deal with 50% profit tax in 2024.

In addition, monthly reporting on personal income tax is set to become the norm.

This comes after the Verkhovna Rada previously rejected an first version of the bill on September 3, which initially was projected to bring in 30 billion hryvnias.

Opposition to the tax hikes has been brewing, with some MPs, like Nina Yuzhanina of the “European Solidarity” party, warning of the potential fallout. Yuzhanina said that the 5% military tax may prove too much for businesses, forcing some of them to  turn to the shadow economy to survive.

“The 5% tax rate is extremely high and will push businesses into the shadows. It’s a rule of thumb—every time you raise the cost of doing business, people look for ways around it.” she stated.

She’s especially concerned that the new policy will hit small entrepreneurs, many of whom have no income or are busy volunteering let alone family-run farms—these new rules could really make life difficult for them too.

According to Yuzhanina, while everyone wants to support Ukraine’s Army, these tax hikes are too big of a burden for ordinary Ukrainians. She’s also flagged concerns about the increasing exodus of businesses moving abroad due to energy and security challenges.

“By the end of the year, people will have to pay 30 billion hryvnias, and by next year, it will be 114 billion. And they will put on the shoulders of ordinary Ukrainians.”

The National Bank of Ukraine voiced their concerns too,  warning that higher taxes could lead to even more inflation, and drive up prices on everyday goods.