Photo: 23rd separate mechanized brigade
The government proposes to increase the expenditure side of the budget by UAH 500 billion to cover military spending primarily. These funds are planned to be accumulated by borrowing on the domestic market, raising excise taxes on fuel, and increasing taxes.
Lesia Zaburanna, an MP from the Servant of the People faction, a member of the Verkhovna Rada Budget Committee, and chair of the Subcommittee on State Budget Expenditures, told Hromadske Radio about this.
Recently, Roksolana Pidlasa, the head of the Verkhovna Rada Budget Committee, said in a podcast on Chronicle of Economics that the military risked being left without salaries at the end of September if the Rada does not decide to raise taxes.
This refers to the Government’s initiative to increase budget expenditures by UAH 500.3 billion. Of this amount, UAH 495.3 billion is planned to be allocated to the security and defense sector. According to Lesia Zaburanna, UAH 147 billion of this amount will be directly spent on salaries and medical care for the military.
Why is there a need to increase spending? The Hromadske Radio speaker notes that in 2023, it was expected that the active phase of the war would decline in the second half of this year, but this did not happen.
“According to the Ministry of Finance of Ukraine, on average, Ukraine spends UAH 5.6 billion on the war every day. If we compare our defense expenditures, this year they were budgeted at USD 42 billion. At the same time, similar defense spending in Russia is about USD 120 billion, which is almost three times higher. And today there is a critical need. After all, there were no plans to increase spending by UAH 500 billion. Because when we planned the budget in 2023, we hoped that the active phase of the war would decline in the second half of the year. But now we see that we still have to continue fighting», — says Zaburanna.
The MP also notes that there is a need to increase spending because the funds Ukraine receives from partners and donors cannot be spent on security and defense. Therefore, Ukraine can only finance this area with domestic revenues.
Zaburanna explains that, first, they plan to increase borrowing on the domestic market (government bonds). The Parliament has also recently passed a bill to increase excise taxes on fuel. According to the MP, this will increase the price by 1.5-2 hryvnias per liter of fuel on average.
The third step is to raise taxes, primarily the military tax.
“If the military tax has been 1.5% until now, they propose to increase the military tax on personal income to 5%. They also plan to introduce a five percent military tax based on two minimum wages per month for individual entrepreneurs of single tax payers of groups 1, 2, and 4. A 1% military tax will be introduced on the income of sole proprietors of the third group, 5% military tax on the value of transactions with precious metals, 30% on the sale of jewelry, and 15% on the sale of new cars, etc.», — Zaburanna explains.
Earlier, on Hromadske Radio, Olena Bilan, a macroeconomist and director of Dragon Capital’s analytical department, said that last year’s amount for military spending was not enough for this year. Therefore, Ukraine has two options: resume printing money or raise taxes.