Taxes in exchange for loans: how Ukraine will pay for cooperation with the IMF
5 March 09:25
ANALYSIS 
On the eve of Ukraine receiving the first tranche of financial aid in the amount of $1.5 billion as part of the updated cooperation program with the IMF, it is now the Ukrainian side’s turn to support the launch of the new program by fulfilling its own promises, including those related to tax innovations. Komersant investigated how important and difficult this will be to achieve.
The renewed relationship between Ukraine and the IMF was formalized last week with the fund’s management approving the terms of the new loan program. These include 12 structural benchmarks that the Ukrainian government has committed to meet by 2026.
In exchange for the $8.1 billion that will replenish the National Bank’s reserves over the next few years, Ukraine must “pay” by, among other things increasing tax revenues by taxing income received through digital platforms; the abolition of tax exemptions on imports of parcels worth up to €150; the indefinite introduction of an increased 5% military levy; and, finally, the extension of VAT taxation to a significant proportion of sole proprietors. These funds are intended to support Ukraine’s deficit budget. Analyst Ihor Chalenko draws attention to this.
“These are definitely initiatives that are not being proposed out of the goodness of our hearts, but in a situation where our budget deficit is being covered, in particular, by external borrowing. Therefore, it is understandable that under such conditions, the IMF wants to see a more balanced state budget and, accordingly, more opportunities for internal coverage of this deficit,” the expert notes.
However, each of the mentioned and potential tax sources has its own characteristics—economic, social, and financial.
An obvious resource
Back in January of this year, it became known that the idea of combining the most unpopular IMF tax requirements into a single bill had taken root in the corridors of power. More precisely, these special provisions were supposed to supplement the draft law on taxation of income from digital platforms, which has been in parliament for several months. The intention was to consider this document in February in order to allay the IMF’s doubts about the new cooperation program with Ukraine.
However, after negotiations, the fund’s management took a step towards the Ukrainian side and not only approved the new program and allocated the first tranche, but also provided additional time for unpopular decisions to be made. The fact that they are indeed unpopular is evidenced by the fact that the Ukrainian parliament has repeatedly intended to consider a bill on the taxation of income from digital platforms, but has been unable to do so.
However, according to Oleg Getman, coordinator of the expert groups of the Economic Expert Platform, taxing income earned through digital platforms is important for the country’s economy. He says that there are approximately 400,000 different self-employed individuals who are currently unregistered and who will enter the formal economy, which will be beneficial for both them and the economy.
Oleg Getman also expressed his opinion on why this document is so unwelcome in parliament.
“It is important to clarify that the name ‘OLX tax’, which is widely used in the public sphere, does not correspond to the essence of this bill at all, because it does not apply to bulletin boards, it does not apply to OLX, it does not apply to all these used goods. This is a kind of scare tactic launched by some populist-minded members of parliament, which does not correspond to reality. The tax will apply to those platforms that receive commission fees for their services. That is, Uber, Bolt, Uklon, Kabanchik, and all the others, i.e., those who receive a percentage for their services. Advertising boards, such as Aviso and OLX, do not receive a percentage, but simply charge a fee for placing ads, and people negotiate among themselves. This is an important nuance, because because of this scare tactic, many MPs have been unable to decide for two months whether to vote for it or not. But this is a useful and positive project,” the expert notes.
The expert also considers the introduction of taxation on low-value international parcels to be an important innovation for our economy. As is well known, goods worth up to €150 are currently exempt from customs duties and VAT when imported into Ukraine. Oleg Getman explains why it is important to abolish this preferential regime.
“Currently, due to the existing exemption, Chinese marketplaces are dumping their goods, which come to us without taxes, essentially destroying our Ukrainian producers of the same goods. The most popular goods arriving in international parcels are clothing, toys, footwear, household goods, and accessories. And all these goods are produced in large quantities in Ukraine. Therefore, the existing privilege is harmful to our economy, it distorts competition, and it must be removed. The price of goods may increase, but not by much. For example, if a product currently costs $5 on a Chinese website, it will cost $6. And there are Ukrainian equivalents, which will become cheaper because competition will finally be leveled. Therefore, people will always have a choice,” the expert emphasizes.
He adds that the main concern was not about prices, but about administrative complications, and this problem will be solved.
“In order for people not to receive a customs declaration for each product and not pay tax separately, a One-Stop Shop system is being introduced. Accordingly, nothing will change for people in terms of administration and regulation. The so-called European One-Stop Shop is when VAT will be added immediately on the Chinese marketplaces’ websites, and recipients of parcels will receive them in the same way as they do now. There will be no customs clearance or declarations. Therefore, this is another important and useful project that needs to be adopted as soon as possible,” the expert believes.
An unobvious resource
Over the past few months, the idea of expanding the circle of VAT payers to include individual entrepreneurs has been met with the most resistance and debate. This rejection in Ukraine was so widespread and categorical that the IMF agreed to raise the threshold for mandatory VAT registration from UAH 1 million to UAH 4 million in annual income. This means that from January 2027, individual entrepreneurs whose income reaches UAH 4 million per year will become VAT payers. However, this option does not find support among business representatives.
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The Alliance of Regional Small Business Associations, for example, is categorically opposed to changes to the simplified taxation system during wartime and until Ukraine is fully integrated into the European Union. This is emphasized by Lyudmila Patiuk, an entrepreneur from Lutsk.
“In fact, the government has agreed to the same conceptual conditions that have already caused a massive reaction from the business community: public protests, petitions, and professional criticism from leading analytical centers. In the current version, only the threshold figure has been changed—from UAH 1 million to UAH 4 million in annual income. This proves once again that this figure is not calculated and justified. However, the logic of fiscal expansion itself remains unchanged,” says the entrepreneur.
At the same time, according to another representative of the ROMB Alliance, Tetyana Slaschuk from Khmelnytskyi, the threshold of UAH 4 million is not a guarantee that the circle of VAT payers will not expand and can be revised at any time.
“This can be done, for example, through additional agreements or within the framework of subsequent program revisions, as a result of inflationary depreciation or by gradually narrowing the parameters of the simplified taxation system. In other words, the changed figure does not change the policy vector. We consider this approach to be flawed because it does not eliminate systemic tax gaps, creates disproportionate administrative costs for small businesses, and does not guarantee a significant fiscal effect,” notes Tetiana Slaschuk.
Lesya Zolotaryova, an entrepreneur from Myrhorod, reminds us that predictability is important for business, and constant fiscal expansion without institutional reform undermines trust.
“The Alliance of Regional Small Business Associations opposes changes to the simplified taxation system during the war and the expansion of VAT without administrative reform. Instead, we advocate for customs reform, risk management, and the fight against large-scale schemes, as well as regulatory impact assessment prior to decision-making. Business cannot be the “easiest source” of budget revenue. The simplified system is a tool for employment, self-employment, and the survival of regions. Excessive fiscalization without systemic reform can have the opposite effect,” the entrepreneur emphasizes.
Oleg Getman, coordinator of the expert groups of the Economic Expert Platform, also believes that there is no need to rush with VAT for sole proprietors, although he calls the news about raising the registration threshold “good.”
“The good news is that the VAT registration threshold for sole proprietors has been raised from UAH 1 million to UAH 4 million, which is the European upper limit of EUR 85,000. We will have to do this sooner or later because we are integrating into Europe. But, in my opinion, there is definitely no need to rush with VAT for sole proprietors. Because this norm, even with the new registration threshold of UAH 4 million from 2027, is not optimal. On the contrary, it is very risky and, in principle, quite harmful. Therefore, this limit of EUR 85,000 could be set for all sole proprietors, but not from a certain year, but from the moment of accession to the EU. We are integrating, joining, and this rule will come into force immediately. That would be the right thing to do,” Oleg Getman believes.
And such a postponement of the introduction of VAT for sole proprietors, in his opinion, should be the subject of negotiations with the IMF.
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In the process of introducing such tax innovations, it is also important not to lose touch with reality. Oleksiy Gerashchenko, economist and professor at the Kyiv-Mohyla Business School, reminds us of this.
“There are over 2 million sole proprietors in Ukraine. If a significant portion of them become VAT payers, the tax service will simply be overwhelmed with the administration of this tax. The current system of blocking tax invoices is not designed to add hundreds of thousands of payers at once. This could paralyze small businesses and cause social unrest. The effectiveness of innovations such as taxation of parcels and digital platforms also depends on the quality of implementation: a poor tax collection process here could negate the whole idea,” the expert emphasizes.
He also believes that the country is in for a major review of budget expenditures.
“We often maintain infrastructure designed for a population of 40 million, but the objective fact is that there are not that many people, and there will not be. The number of schools, universities, social institutions, and state employees cannot correspond to previous indicators, and this is where tough, unpopular decisions are needed. It is impossible to keep raising taxes. This will only lead to tax evasion and create incentives to look for another place to live,” says economist Oleksiy Gerashchenko.
According to him, this is a difficult question about the level of taxation, the state’s share in the economy, and what will be financed from this share and what should disappear as an item of government spending forever.
The country needs a broad dialogue between the government, business, and civil society on how to balance all interests.
Author: Serhiy Vasilevych
