Bread at 40 UAH: How New Taxes Will Impact Ukrainians' Wallets.

Tax Code Amendment Project Approved in the First Reading

On September 17, the Verkhovna Rada of Ukraine approved in the first reading the draft amendments to the Tax Code, which is to take effect on October 1, 2023.

According to member of parliament Yaroslav Zheleznyak, the bill will be implemented retroactively through an expedited procedure for reviewing amendments in September. It is expected that in mid-October, the Verkhovna Rada will consider the bill in the second reading.

Tax Changes

According to the new law, the military tax for citizens will increase from 1.5% to 5%. For sole proprietors of groups 1, 2, and 4, it will be 800 UAH per month, and for sole proprietors of group 3 - 1% of income. The profit tax for non-banking financial institutions will increase to 25%, and for banks - to 50% for 2024.

Owners of gas stations will be required to pay advance payments on profit tax: 60,000 UAH for trading multiple types of fuel, 30,000 UAH for trading exclusively liquefied gas, and 45,000 UAH if the sale of liquefied gas exceeds 50% of the total volume.

Experts' Predictions and Cautions

Experts predict that these changes could lead to a 20-30% increase in food prices. For example, the price of bread could rise from 30 to 36-39 UAH.

Economic expert Yulia Samaeva notes that the main tax burden will fall on micro-businesses and employee salaries. She predicts that most salaries will either stop growing or go into the shadow economy.

The head of the National Bank of Ukraine, Andriy Pyshny, expressed doubts about the advisability of increasing the banking profit tax to 50%. He believes it would be better to take measures to increase the coverage of the budget deficit through the sale of military bonds.

Economists and Western partners of Ukraine urge the government to focus on combating corruption and the shadow economy instead of raising taxes. U.S. Ambassador to Ukraine Bridget Brink and U.S. Special Representative Penny Pritzker advise the Ukrainian government to take measures to obtain revenue that the state loses due to offshore schemes and customs abuses.