VAT payment rate has risen to pre-war levels: what it means for the budget
8 September 2025 22:02
In July 2025, the level of value added tax (VAT) payment in Ukraine reached 3.1%, which is almost the same as in July 2024. This was reported by MP Yaroslav Zheleznyak, "Komersant Ukrainian" reports.
The parliamentarian noted that during the reporting month, tax revenues showed growth, but unevenly: some taxes provided a significant increase, while others recorded a decline. At the same time, signs of riskiness and structural imbalances were detected in a number of sectors of the economy, which necessitates strengthening administration and monitoring.
In June, the figure was 2.9%, and in May it was only 2.79%. Thus, the July result demonstrates a gradual recovery of fiscal discipline after a significant decline at the beginning of the year. For comparison, in January 2025, the VAT payment rate was 3.2%, but there was a steady decline during the first five months of the year.
The most interesting thing for me was to see that the VAT payment rate has returned to the level of 2024 and is 3.1%. This is a positive trend, given the significant drop in January-May,” Zheleznyak said.
Reasons for the fall in value added tax
Financiers attribute the drop in VAT payments in the first half of 2025 to several factors
- a general slowdown in economic activity amid the war;
- an increase in the share of shadow turnover;
- problems with VAT administration, including “twists” – illegal VAT refund schemes.
At the same time, revenues have been stabilizing since June, which may indicate increased control by the tax authorities and business adaptation to new fiscal requirements.
Ukraine and the problem of the shadow economy
Despite the positive dynamics, the problem of the shadow sector remains relevant. According to Danylo Hetmantsev, Chairman of the Parliamentary Committee on Finance, Taxation and Customs Policy, the shadow economy in Ukraine annually reaches UAH 800-900 billion.
He identified the most problematic areas as follows:
- trade
- agricultural sector
- smuggling
- salaries in envelopes;
- vAT schemes, in particular, “twists and turns”.
These phenomena significantly reduce the tax base and impede the effective functioning of the state budget, especially in times of war.
In general, the return of the VAT rate to the pre-war level of 2024 is a promising signal for the fiscal system, but it does not guarantee sustainable revenue growth. Experts warn that without structural changes in tax administration and without combating the shadow economy, the situation could deteriorate again.
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In the coming months, the Government and Parliament are expected to focus on updating the legislative mechanisms for VAT administration, as well as on digitalizing tax control, which will allow better tracking of tax liabilities of enterprises.
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