09:43 19.07.2024

Govt submits to parliament bills on increasing defense spending in 2024 by UAH 500.3 bln, taxes by UAH 125 bln

4 min read

Government bills on introducing amendments to the 2024 state budget regarding the financial support of the security and defense sector (No. 11417) and amendments to the Tax Code and other laws on the specifics of taxation during martial law (No. 11416) were registered in Verkhovna Rada on Thursday evening.

According to the text of the documents posted on the parliament’s website, amendments to the 2024 state budget suggest an increase in spending on the security and defense sector by UAH 500.3 billion with a decrease in the cost of servicing public debt due to restructuring by UAH 65.7 billion.

In particular, it is proposed to increase spending on wages with accruals by UAH 77.9 billion, on military, special equipment and machinery - by UAH 256.2 billion, on the construction of military engineering and fortification structures - by UAH 40.4 billion and other expenses – by UAH 120.8 billion.

Accordingly, it is proposed to increase state budget expenditures by UAH 434.6 billion, which will be provided by UAH 214.5 billion in additional revenues and UAH 220.1 billion in additional financing: UAH 160.2 billion increase in the sale of government bonds to banks and UAH 59.8 billion reduction in payments to repay state debt.

“The implementation of the act will lead to an increase in the maximum volume of the state budget deficit by 2.8% (of GDP) and the maximum volume of public debt by UAH 220.1 billion,” the explanatory note states.

It is clarified that the 2024 state budget revenues are proposed in the amount of UAH 1.983 trillion, including the general fund - UAH 1.811 trillion, expenses - UAH 3.748 trillion and UAH 3.547 trillion, respectively, the maximum deficit is UAH 1.792 trillion and UAH 1.729 trillion, while the maximum public debt is UAH 7.680 trillion.

State budget revenues for 2023 amounted to UAH 2.67 trillion, of which grant assistance amounted to UAH 430 billion. Cash expenditures of the state budget over the past year exceeded UAH 4 trillion, and the deficit amounted to UAH 1.33 trillion with an average annual exchange rate of about UAH 36.6/$1.

Revenues within the 2024 state budget for the first half of the year amounted to UAH 1.544 trillion, including UAH 913.4 billion in the general fund, while cash expenses amounted to UAH 1.933 trillion and UAH 1.544 trillion, respectively.

As for the bill on amendments to the Tax Code, as the Ministry of Finance indicates, it assumes an increase in tax revenues this year by approximately UAH 125 billion in addition to an increase in excise taxes on fuel and tobacco products, which should bring another UAH 9.8 billion and UAH 3.8 billion respectively.

Among the government’s main initiatives is an increase in war tax on personal income from 1.5% to 5% (the estimated additional income is about UAH 45.5 billion) and war tax payment by individual entrepreneurs in the amount of UAH 800 per month (UAH 2.3 billion), and the introduction of war tax for legal entities and individual entrepreneurs of the third group in the amount of 1% of income (UAH 50.5 billion).

It was also proposed to increase or introduce, where it currently does not exist, war tax of 5% for mobile communications, the purchase of bank metals and real estate (with the exception of one object per year), 15% for the purchase of passenger cars for their first registration in Ukraine and 30% for the purchase of jewelry with payment by retailers, the deputy said.

Other innovations include the monthly payment of advance contributions for corporate income tax by fuel retailers in the amount of 0.5 minimum wage per cubic meter of fuel storage tanks (UAH 8.3 billion), establishing a specific excise tax rate of EUR0.1 per liter of drinks with added sugar or other sweeteners (UAH 2.4 billion), lowering the threshold for duty-free parcels from abroad from EUR 150 to EUR 45 (UAH 3.3 billion).

It is expected that in 2025 these measures will replenish the state budget by UAH 341.9 billion.

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