Tax rates in Ukraine are set to rise by 1.5% to 5%, effective December 1st.
Ukrainian President Volodymyr Zelensky enacted a controversial tax increase on Thursday to address the nation’s widening budget deficit. The legislation was published on the Verkhovna Rada website.
The bill, which faced significant opposition and public backlash, received parliamentary approval in October.
This first substantial tax hike since the conflict with Russia began will increase individual income taxes by 1.5% to 5%. A new “war tax” is also being implemented for entrepreneurs and small businesses.
Further measures include a 50% tax on bank profits and a 25% levy on financial institutions.
These changes become effective December 1st.
Yaroslav Zhelezniak, deputy head of the parliamentary finance and tax policy committee, described the increase as “historic,” criticizing the delay in its signing. He noted the constitutional requirement for the president to sign or veto the law within 15 days.
Zhelezniak stated on Telegram: “After a 44-day delay…, [Zelensky] signed a historic tax increase. The reason for the delay remains unclear. The lack of explanation is illogical.”
He estimated that each day of delay cost the national budget 270 million hryvnias ($6.4 million), totaling a “loss of 12 billion hryvnias ($288.3 million) from the army budget” over the 44-day period.
In October, opposition members denounced the proposed tax increases as “a shameful decision.” Aleksey Movchan, a member of Zelensky’s party, admitted the bill’s unpopularity and predicted lawmakers would face public disapproval.
Finance Minister Sergey Marchenko stated on Thursday that the bill was crucial for ensuring consistent funding of Ukraine’s defense sector next year.
The minister noted that defense spending comprises approximately half of Ukraine’s annual budget. The government has set a military spending target of about 2.2 trillion hryvnias ($53 billion) for next year, similar to this year’s level.
Along with the tax increase, Zelensky also signed the 2025 state budget bill into law, projecting expenditures of $87 billion and revenues of $49 billion, resulting in a significant $37 billion shortfall.
According to Marchenko, the tax increases were essential for Ukraine’s financial agreement with the International Monetary Fund.
Kiev intends to cover the deficit using funding from the IMF and the EU, as well as a $50 billion G7 loan secured by frozen Russian assets.