The government's plans to increase taxes for 2024 have undergone significant adjustments, which was the result of the work of a special group that reviewed draft law No. 11416d. Expectations of revenues from this draft law, which were initially forecast at the level of 125 billion hryvnias, have now been reduced to 30 billion hryvnias. This significant reduction was announced after a task force meeting on August 28 where the tax changes were discussed.
The Ministry of Finance came to the defense of the banking sector, expressing categorical disagreement with the increase of the bank profit tax to 50%. This decision is explained by two main factors:
- Contradiction with the requirements of the IMF : The increase in taxes on banks is contrary to the terms of cooperation with the International Monetary Fund, which may lead to the risk of disruption of the financial support program.
- Risks for domestic borrowing : Banks are the main buyers of domestic government bonds (DGBs), and an increase in tax pressure on them may lead to a decrease in demand for DGBs, which in turn will make it more difficult to finance the budget.
According to experts, the increase in taxes on banks can lead to higher prices for loans for consumers and businesses, as well as reduce the profitability of financial institutions, which can negatively affect the stability of the banking sector as a whole.
Instead of the originally planned 125 billion hryvnias, the government now expects to collect only 57.8 billion hryvnias in 2024. However, some regulations will not have the expected effect already this year:
- A 1% increase in the tax on the third group of private enterprises and a 25% increase in the income tax for financial institutions will not take effect until the end of the year.
Already next year, the expected revenues have also decreased: instead of the previously forecasted 350 billion hryvnias, now only 136 billion hryvnias are expected.
The Chairman of the Tax Committee of the Verkhovna Rada reported on the results of the group's work on the draft law:
- The increase in the military levy will be limited to the period of martial law.
- The military levy will be directed through a special fund exclusively to finance the Armed Forces of Ukraine.
- The tax on excess profits of banks was completely removed from the amendments to the draft law.
- Advance payments from gas stations were somewhat clarified.
- The increase in income tax for financial institutions has been postponed for the future.
- The 1% military levy for legal entities on the uniform tax of the third group was also abolished.
At the "Ukraine 2024. Independence" forum, Prime Minister Denys Shmyhal noted that the budget deficit will amount to $35 billion. However, the government already has a plan to cover $20 billion of this deficit with assistance from the IMF and the Ukraine Facility program from the European Union.
Shmyhal also emphasized the importance of obtaining frozen Russian assets. It is planned to receive the first tranche of $50 billion by the end of 2024, followed by confiscation and restitution of the frozen assets of the Russian Federation, which are currently estimated at $300 billion.
