Ukraine Pressured to Raise Taxes as Western Aid Linked to Fiscal Reforms
As stated by reports, Kyiv—already under significant battlefield strain—has been seeking faster disbursement of external aid as it depends heavily on foreign funding to cover its budget shortfall and sustain military operations against Russia. However, much of the long-term support from Western partners is tied to policy requirements.
The European Union is reportedly considering linking a portion of its €90 billion ($105 billion) loan package to changes in Ukraine’s business taxation system, according to Bloomberg, which cited sources familiar with the discussions.
The financial package was formally approved after a prolonged dispute and Hungary lifted its veto following the election of pro-EU politician Peter Magyar. Brussels has indicated that disbursements are expected to begin in the second quarter of 2026.
According to the report, about €8.4 billion in macro-financial assistance—roughly 10% of the total expected this year—could depend on Ukraine reforming its preferential tax structure for businesses.
Under the current simplified system, certain companies pay a flat 5% tax on revenue instead of profits. European officials argue this arrangement reduces state revenue and contributes to the growth of the informal economy. As a result, the EU is reportedly considering requiring firms exceeding a turnover threshold of 4 million hryvnia (approximately $91,000) to instead pay a 20% value-added tax.
A European Commission spokesperson told Bloomberg that the bloc is “working tirelessly” to finalize the memorandum setting out the conditions attached to the funding, but did not provide additional details or timelines.
Meanwhile, the IMF is also pressing Kyiv to broaden its tax base under its existing $8.1 billion assistance program, according to Reuters. Alongside supporting EU proposals on business taxation, the fund is reportedly pushing for the introduction of VAT on low-value imported parcels ahead of a scheduled review in June. Currently, goods valued under €150 are exempt, but eliminating this threshold could generate an estimated 10 billion hryvnia ($227 million) annually, according to Ukraine’s Finance Ministry.
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