IMF stands for raising one of the taxes — who will be affected

The International Monetary Fund (IMF) has released recommendations for the Ukrainian authorities to further raise the value-added tax (VAT). Such a source of financing can replenish the state budget in the short term.

This was reported by the Deputy Chief of the IMF mission in Ukraine, Trevor Lessard, as "Interfax-Ukraine" reports.

Advice of IMF on treasury revenues

As Lessard notes, Ukraine has a need to reform the tax system and fully implement the carbon border adjustment mechanism (CBAM). At the same time, the most effective way to fill the state treasury is to increase the VAT rate.

"If you need immediate revenue, and you want to do it in an effective, large-scale way that will provide you with revenue next month, it is difficult to imagine a better policy option than increasing the VAT rate, in terms of how much you can attract, how it will distribute the burden of the tax increase," the fund representative believes.

He noted that Ukraine has adopted a National Revenue Strategy (NRS), which provides for long-term reforms to collect more taxes. One of the goals of the NRS is to improve tax fairness.

It contains many norms regarding the work of customs, a simplified taxation system, and other tax reforms that will increase budget revenues and become an important part of strengthening fairness.

Lessard noted that in case of a change in tax policy, the investment climate will improve, which will make Ukraine more competitive. He also emphasized the importance of increasing excise duties, in particular on alcohol and tobacco products, to the norms which are applicable in the European Union (EU).

As you know, the value-added tax (VAT) is one of the main tools that allows filling the state budget. Currently, the VAT rate is 20%, and reduced rates have been established for a number of goods. In particular, for medicines and agricultural products — 7% and 14%, respectively.

What else is worth knowing

As a reminder, the International Monetary Fund revised its forecasts for the economy of Ukraine for 2024-2025, lowering them due to the war. Its delay leads to new economic losses for the country.

We also wrote that the authorities plan to further update the tax system. The Value-Added Tax (VAT) rate may increase, and the introduction of a progressive personal income tax is also being considered.