An increase in the military tax rate could lead to a reduction in wages in Ukraine. Economists have analysed what will change for Ukrainians after the tax is raised from 1.5% to 5%. In an exclusive commentary for [comersant], Danylo Monin made a forecast.
“Draft Law 11416-d will reduce wages by 3.5%. However, salary increases of around 20% are currently in the works. Private companies that can increase salaries will solve the problem. Where there is no such possibility, we should expect the situation to worsen,” said Danylo Monin.
What will it change for every Ukrainian?
Economist Danylo Monin notes that the tax increase will also lead to price increases.
“To compensate for the tax hike, businesses will have to raise prices, which will result in higher inflation,” Monin said.
At the same time, the economist reassures that the increase will not be significant. It will add 1-2% to the overall inflation rate.
Currently, Monin says, inflation depends more on the increase in the cost of electricity for industry and the devaluation of our currency. It is expected that devaluation will reach 10%, despite the fact that the Ministry of Economy has planned 9.5% for 2025.
Anatoliy Amelin, Executive Director and co-founder of the Ukrainian Institute for the Future think tank, added in an exclusive commentary to 
:
“I understand that there is a war, that we need to finance the frontline, but I don’t understand why the government is raising taxes and has not reduced its expenses, which are very high and unproductive.”
As a reminder, the Verkhovna Rada adopted the resource draft law No. 11416-d as a basis, with 241 MPs voting in favour.
The updated version of the draft law provides for:
1) an increase in the military tax from 1.5% to 5%
- establishment of the CPT at 1% of the income of Group III single tax payers;
- establishing the CPT for individual entrepreneurs – single tax payers of groups I, II and IV at 10% of the minimum wage;
2) setting the corporate income tax rate for banks at 50% for 2024;
3) setting the corporate income tax rate for non-bank financial institutions (except for insurers) at 25%;
4) improving the proposed model for determining the amount of advance corporate income tax payments for petrol stations;
5) change of the tax period from quarterly to monthly for reporting on income paid to individuals (for economic booking);
6) instructing the Cabinet of Ministers to develop a draft law amending the Budget Code of Ukraine to transfer military fees to a special fund of the state budget to be used for the needs of the security and defence sector.
Since the law will not be adopted in its entirety by October, the implementation will be retroactive to 1 October, MP Yaroslav Zheleznyak said.
Author: Anastasia Fedor