Last autumn, the Verkhovna Rada of Ukraine removed the “military” and “security” personal income tax from community budgets in favour of the central government and transferred it to a special state budget by adopting the draft law No. 10037.
Thus, the tax, which previously belonged to local communities, has been redistributed for more than six months between the State Special Communications Service, the Ministry of Defence of Ukraine, the Ministry of Strategic Industries, the military, and others.
As it turned out, as of July this year, the state did not allocate more than half of the “military” personal income tax to the needs of the Armed Forces. This is evidenced by according to the data of the Ministry of Financeprovided by the Ministry at the request of the Association of Ukrainian Cities.
[Kommersant] decided to find out why this situation has arisen and what the “military” personal income tax 2024 has become as a result.
Who was for and against the law No. 10037 on military personal income tax and why
Immediately after its adoption, Law No. 10037 sparked a lively discussion among politicians and experts. In particular the law was opposed byOksana Prodan, Advisor to the Head of the Association of Cities, former Member of Parliament.
The main message of both those in favour and against was concern about the actual redistribution of funds and their intended purpose.
Iryna Gerashchenko, a representative of the European Solidarity party, who opposed the law, stressed that “the PIT funds will be spent uncontrollably on paving, roads, and not on the military”.
The mayor of Kyiv, Vitali Klitschko, also opposed the law, stating that the withdrawal of the “military” PIT from communities would reduce their ability to help the army and negatively affect the life support of cities, towns and villages.
In contrast, the head of the Tax Committee, Danylo Hetmantsev, said that the PIT, on the contrary, would not be dissolved in the general state budget.
“The money will not be spent on roads (paving, drums), but will be directed to a special fund. These funds will be used to finance the purchase of drones, military equipment and machinery, the development of defence industry programmes, and 10% will remain directly in military units.”
What happened to the “military” personal income tax in 2024
As a result, in more than six months, the main spending units have used only 45% of the actual personal income tax revenues, the Ministry of Finance said at the request of the Association of Ukrainian Cities.
“In total, in 2024, expenditures amounting to UAH 32 billion were made out of UAH 77.3 billion in revenues. Moreover, while military units systematically use the funds, the Ministry of Strategic Industries was able to use “as much as” UAH 529 million, or 2%, of the UAH 25 billion allocated to it for the provision of military units during this period,” the Association said in a statement.
It also turned out that in 2023, the funds seized from communities were used by 65%. And while the Ministry of Defence used 100% of the funds, the State Special Communications Service used UAH 0, the publication says.
According to MP Oleksiy Honcharenko, it would be more effective to return these funds back to the management of communities with some clarifications.
“Before the personal income tax was given to the ministries, some local communities did spend this money to help the military. But why not oblige communities to redirect this money to the military directly on the ground? No, they had to create a whole scheme, take it away from the ministries and departments with hysteria and screaming, and then use it for nothing. Employees of the Year,” he wrote he wrote on his telegram channel.
At the same time, not everyone is concerned about the underutilisation of personal income tax. For example, former Minister of Infrastructure of Ukraine Oleksandr Kubrakov believes that personal income tax alone is not enough for the army. This is understandable – war requires money. However, why not use the money that has already been allocated first, and only then spend the reserves?
“In January 2024, I initiated an urgent allocation of almost UAH 800 million from the state reserve fund. Yes, it was not exactly the authority of our ministry, but we understood that this money would help cover the need for funding for our brigades at least in the first months of the new year. We simply drafted a resolution and quickly passed it through the government,” Kubrakov wrote on his Facebook page, adding that he later drafted a similar bill and the Ministry of Defence of Ukraine sent it to the Ministry of Economy of Ukraine.
“Then, at a government meeting, Prime Minister Denys Shmyhal and Finance Minister Sergiy Marchenko removed the issue of allocating money from the reserve fund to finance the brigades from consideration, and this issue has not been resolved for almost six months. The main argument of the Minister of Finance was that soon the brigades will start receiving a part of the military personal income tax and everything will be fine,” he said and stressed that he hoped the draft law would be passed.
However, Kubrakov’s post does not mention the underutilisation of the available personal income tax.
Journalists 
“The very concept of the law has proven itself. For example, during the last communication with the brigades on the contact line, they clearly said that they had finally seen additional funds enter their accounts. This is a motivator and a great incentive for them, and they see that the economy is working and the government is trying to improve their financial security. All this became possible precisely because we started transferring personal income tax to the military, to combat brigades, according to a certain formula.
As for the use/non-use of funds, I would like to hear from them (institutions, ministries – ed.) myself. As for Kubrakov, it’s hard for me to comment on him, because I don’t know what exactly he is guided by in his posts,” Natalukha said in an exclusive commentary
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“Underutilisation” of personal income tax – a legislative conflict?
As explained to journalists
“We are talking to you about the main spending units of budget funds. They have not spent the money not because they have no place to spend it, but because the procedure itself involves certain steps, without which these agencies will be accused of misuse of funds and corruption. As a rule, the maximum amount of payments from the budget falls on November-December. This is when all acts of completion are closed. So the procedure is as follows: a tender is held, then an advance payment is made, and then the certificates of completion are expected. And this usually happens at the end of the year,” the expert explained.
In his opinion, the Ministry of Defence, which is almost the only one that has used PIT by 100%, has done so through long-term contacts.
“The Ministry of Defence receives a huge amount of funding under contracts that have a multi-year period. So let’s imagine a situation: you signed a contract for the supply of, say, military equipment in 2022. And you have to fulfil this contract within 3-4 years. You receive money and pay for it, and so on. In contrast, the same State Special Communications Service has contracts for, say, one year. And they have to go through all the procedures I mentioned above,” he added.
According to Oleg Pendzin, the real result of the use of the PIT will be seen at the end of the year. For its part, the editorial team
Author – Aliona Kaplina