Hetmantsev announced a VAT increase in 2025 — what is known

In 2024, Ukraine will significantly increase taxes and military levy. Another revision of tax rates is also expected in 2025.

This was stated by Danylo Hetmantsev, Head of the Parliamentary Committee on Finance, Taxation and Customs Policy, for the EP publication.

Tax review in 2025

According to the law passed by the Verkhovna Rada on October 10, the state will collect 23% of income tax and military pay from salaries instead of 19.5%. The changes will also affect gas stations, banks and non-bank financial institutions. Most of the changes will take effect in October this year.

At the same time, the authorities will have to discuss the possibility of raising the VAT in 2025 if the state budget is short of funds. The International Monetary Fund (IMF) also advocates tax increases.

Hetmantsev said that the Verkhovna Rada was considering whether to raise the military tax or the VAT this year. They would have brought almost comparable budget revenues: a one-percentage-point increase in the military tax would bring in about 30 billion UAH, and VAT would bring in 45-46 billion UAH.

"Firstly, regarding formal and informal businesses: all taxes in the country are paid by formal businesses. VAT is also paid by those who sell to formal businesses. If you import an iPhone informally, you do not pay VAT. That's why whether these taxes are entirely formal is quite manipulative, because there is an informal component in both," the head of the Tax Committee said.

According to him, VAT has disadvantages, such as its direct impact on inflation, while the military tax has a positive impact on inflation because it reduces consumption.

"Unfortunately, this discussion is not over. I would like to quote the Minister of Finance, who said that if there is a critical increase in spending between the first and second readings of the State Budget for 2025, we will have to revisit the issue of raising VAT. This is in line with the agreement with the IMF," Hetmantsev explained.

What else do you need to know

As a reminder, on October 10, 2024, the Verkhovna Rada passed Bill No. 11416-d, which amends the tax system, in particular, raising the military tax rate for employees from 1.5% to 5%. Such an increase may lead to a decrease in net salaries as early as October 2024.

We also wrote that the Ukrainian authorities intend to increase a number of taxes starting from October 1, 2024. This is stipulated in the relevant draft law No. 11416-d, which, if adopted by the Verkhovna Rada in the second reading, will provide for a retroactive increase in tax rates.