In the coming weeks, a delegation from the International Monetary Fund will visit Ukraine to assess the progress of key economic reforms and the expansion of the tax base within the current loan program amounting to $8.1 billion.
This is reported by Finway
Importance of Reforms and Tax Base Expansion
IMF spokesperson Julie Kozak emphasized the necessity for Ukraine to attract additional domestic financing given the “very, very significant” financial needs that persist even with substantial external support from international partners following the onset of the full-scale aggression by the Russian Federation in February 2022.
“It is extremely important for Ukraine to attract more domestic financing to cover its very, very significant financial needs in addition to the substantial external support the country has received from donors since the beginning of Russia’s full-scale invasion in February 2022.”
According to Kozak, the Ukrainian government is obligated to expand the state’s tax base and legalize a significant portion of the shadow economy, which is estimated to account for approximately 45% of GDP. Implementing comprehensive reforms under the current IMF program is not only a condition for receiving financial support but also one of the key factors for Ukraine’s further movement towards EU membership and attracting international donor assistance.
Possible Changes in Taxation and IMF’s Position
The current IMF loan program, approved in February, is due for another review in June to determine how well Ukraine is adhering to the established goals. As part of this review, Kozak noted that particular attention will be paid to tax policy issues, including the likelihood of implementing a value-added tax (VAT) on inexpensive parcels from abroad, as well as potential taxation for individual entrepreneurs (FOPs). At the same time, details regarding potential easing of IMF lending conditions are not currently being disclosed.
It is worth noting that at the end of April, the First Deputy Speaker of the Verkhovna Rada, Oleksandr Korniienko, stated that the parliament is not ready to make decisions that could significantly impact small businesses during the state of war. In particular, the consideration of the draft law on VAT taxation for FOPs was postponed for further development of balanced solutions in cooperation with the IMF.
Prime Minister Yulia Svyrydenko emphasized that the International Monetary Fund has shown understanding regarding the sensitivity of introducing VAT for FOPs, and further steps in this direction will be considered taking into account the position of small businesses and the economic realities of the country.