Ukraine has decided to reconsider the planned increase in the tax burden for individual entrepreneurs (IEs), which was one of the requirements for receiving an $8 billion loan from the International Monetary Fund (IMF). Despite the previous agreement to implement new tax rules, the country’s leadership is leaning towards easing the conditions for entrepreneurs due to significant public outcry.
This is reported by Finway
What Changes Are Planned for IEs
According to the initial draft law, it was planned to introduce a value-added tax (VAT) for IEs whose annual income exceeds one million hryvnias. However, this move has sparked a wave of criticism not only among entrepreneurs but also among government representatives. President Volodymyr Zelensky, Prime Minister Yulia Svyrydenko, and a large portion of Members of Parliament have expressed negative views towards this initiative.
“One of Bloomberg’s sources reported that Zelensky privately reproached Finance Minister Serhiy Marchenko for agreeing to such unpopular terms.”
In light of these circumstances, the Ministry of Finance is preparing an updated version of the draft law. The new proposals include raising the income threshold for VAT payment to 2 or even 4 million hryvnias per year. The draft law, which was previously planned to be submitted for government consideration in January, has now been postponed to February 10.
Negotiations with the IMF and Expectations for Funding
Despite the possible easing of tax requirements, even the updated draft law remains unpopular among the public. This is due to rising business costs from regular power outages and the need to switch to generators.
At the same time, the IMF, according to sources, is ready to be flexible in negotiations with the Ukrainian side. This is facilitated by the recent visit of IMF Managing Director Kristalina Georgieva to Kyiv, which demonstrated a desire to maintain the financial aid program and continue the dialogue. Kyiv has already received preliminary approval for the loan in November and is currently awaiting final approval from the IMF Board. The four-year financial support package is likely to be considered by the end of February; however, the adoption of the tax draft law remains one of the main conditions for receiving assistance.