On 31 July, Prime Minister of Ukraine Denys Shmyhal met with representatives of the Presidential Council for Support of Entrepreneurship under Martial Law.
The meeting was also attended by First Deputy Prime Minister and Minister of Economy Yuliia Svyrydenko, Minister of Finance Sergii Marchenko, Minister of Defence Rustem Umerov, Head of the Presidential Office Andriy Yermak and Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy Danylo Hetmantsev.
The main topic of discussion during the meeting was increasing state budget revenues to finance Ukraine’s defence in the face of russian aggression.
“The key issue is resources for defence. By the end of the year, our army needs an additional UAH 500 billion, of which we plan to raise one quarter by revising taxes. We understand that this may be a challenge for business, but it is a critical need. I am grateful to those businesses that continue to operate and pay taxes in good faith. This is extremely important in a situation where the Government allocates every hryvnia of Ukrainian taxpayers from the budget for the defence of our country,” said Denys Shmyhal.
Representatives of the Government and the Ministry of Defence outlined the areas of use of the additional UAH 500 billion of military spending. These funds will be used to pay salaries to the military (60%) and to purchase weapons, equipment and other critical expenses (40%).
The Minister of Finance said that almost 3/4 of the required additional funds are to be raised through domestic borrowing and the over-execution of the state budget revenues, in particular through the de-shadowing of the economy. The remaining 1/4 is to be raised by revising the tax policy, which is a necessary step in response to the challenges of the full-scale russian invasion.
Since the beginning of this invasion, the Government has avoided raising taxes on business. However, in the current environment, when other sources of financing have been exhausted, a tax review is a necessary step.
Government representatives also stressed that all non-military budget expenditures were financed with the support of Ukraine’s international partners. These funds are used for social payments, economic support, and salaries for teachers and doctors. Ukraine’s defence and security are financed exclusively by Ukrainian taxpayers.
Business representatives, in turn, suggested alternative ways to increase budget revenues to finance defence, such as de-shadowing the economy, customs reform, and cutting government and local budget expenditures.
These steps are part of the Government’s strategy, including the redirection of military personal income tax from local budgets to finance defence, the recent cutting of 24,000 civil service vacancies, and the introduction of tools to limit unnecessary capital expenditures in local budgets.
The participants of the meeting agreed to continue the dialogue on the basis of the Verkhovna Rada Committee to develop the most effective solutions as soon as possible.