Ukraine imposes first wartime tax hikes to fight Russian invasion

Kiev [Ukraine], December 1: President Volodymyr Zelenskiy signed into law Ukraine's
first wartime tax increases as the war against Russia reaches its 34th month.
Finance Minister Serhiy Marchenkko said that the bill was vital to ensure smooth
funding for the Ukrainian defence sector next year.
The changes will take effect from Dec. 1, he said.
The government is raising the war tax for residents to 5% from 1.5% paid currently on
personal income and is introducing the war tax for tens of thousands of individual
entrepreneurs and small businesses.
It also increases some rental payments, taxes commercial banks' profits at 50%, and
raises taxes on the profits of other financial institutions to 25%.
The tax increases would help raise about 140 billion hryvnias ($3.4 billion) in additional
revenues next year to fund Ukraine's defence eFForts at a critical juncture of the war as
Kyiv is battling with a much bigger and better-equipped enemy.
The move to increase taxes during the war has proved a sensitive and much debated
topic in Ukraine as poverty has risen and the economy has been devastated by fierce
combat along more than 1,000 kilometers (620 miles) of front line, Russian
bombardments of cities and infrastructure.
Marchenko said that the approval of tax increases was also a vital step for Ukraine's
financial program with the International Monetary Fund, a key lender.
The government and IMF's staFF have reached an agreement that would give Kyiv access
to about $1.1 billion but the Fund's executive board must still weigh in on the deal.
Ukraine's military spending accounts for about half of the country's annual budget,
Marchenko said.
The government targets military spending at about 2.2 trillion hryvnias next year, roughly
at the same level as this year.
Kyiv covers the soldiers' wages and domestic arms production with its state revenues
but it crucially depends on financial aid from its Western partners to cover social and
humanitarian spending.
Ukraine's external financing needs would reach about $38.4 billion next year,
Marchenko said.
The budget deficit is targeted at about 19.4% of the gross domestic product in 2025,
down from about 24% planned for this year, he said.
The government plans to cover next year's deficit with financing from the IMF, the
European Union, and also with funds from a long-awaited $50 billion G-7 loan backed
by frozen Russian assets.
Source: Fijian Broadcasting Corporation