The Cost of Decisions: How Much Will It Cost Ukraine to Reject the Tax Reforms Agreed Upon with the IMF
18 March 17:05
For Ukrainian lawmakers who oppose the government’s tax reforms, the moment of truth is approaching. The International Monetary Fund expects tax changes agreed upon in cooperation with the Ukrainian government to be adopted as early as March. To this end, IMF representatives are even prepared to meet with lawmakers in person. "Komersant Ukrainian" investigated what is needed to achieve this outcome.
Last week, lawmakers did not support the government’s bill, which was intended to regulate the taxation of income earned through digital platforms. This can be seen as yet another confirmation of parliament’s rejection of the government’s tax initiatives, which were agreed upon with the IMF. As a reminder, this package, in addition to taxing income earned through digital platforms, also includes the abolition of tax exemptions on imports of low-value parcels, the permanent retention of a 5% military levy, and the introduction of VAT for a certain number of sole proprietorships starting January 1, 2027. These innovations serve as “beacons” in cooperation with the IMF; their adoption in March is tied to the extension of Ukraine’s loan program, the first tranche of which, amounting to approximately $1.5 billion, has already been deposited into the Ukrainian state budget. However, the relevant tax changes have not yet been considered by lawmakers.
“I can say that I am concerned,” said Priscilla Toffano, the IMF’s Resident Representative in Ukraine, in comments to Bloomberg earlier this week.
According to the publication, the fact that lawmakers have still not been able to discuss several changes proposed by the IMF is an expression of defiance toward President Volodymyr Zelenskyy and could potentially paralyze parliament.
Given the critical nature of the situation, IMF mission staff have even decided to take on a role that is either advocacy or mediation and have included meetings with Ukrainian lawmakers in their plans starting March 18. But does this guarantee a result?
Parliamentary Reality
The parliamentary coalition currently in the Verkhovna Rada is, to put it mildly, not having the best of times. Some of its members have become disillusioned with their roles as lawmakers, some have grown weary of legislative work, and others have simply taken offense—whether at their colleagues or at the government and the president. Consequently, the coalition often lacks the potential and cohesion needed to make important decisions. And so there is reason to speak of the need for political decisions. This is the view of Oleg Getman, coordinator of the expert groups at the Economic Expert Platform.
“Ideally, what needs to be done is to rebuild the coalition in parliament. It is becoming increasingly dysfunctional, and therefore forming a new parliamentary coalition and the corresponding government reshuffle is the best possible solution right now. It is a political decision, but it is currently the only one that works. For example, a coalition of “Servant of the People” MPs plus “Voice” plus independents would be a normal, viable coalition that could function for another couple of years. “Well, there’s a reason why they set a term for parliament—say, five years—and then hold new elections: precisely because it gets worn out, and these kinds of negative processes start to take hold. So that would be ideal,” says the expert.
But alongside the ideal Plan A, there must also be a more pragmatic Plan B. Both IMF representatives and government officials could encourage its implementation during meetings with lawmakers. Oleg Getman envisions this version of the plan as follows:
“The Ministry of Finance needs to draft an updated bill right now. They’re thinking of creating this ‘OneGreatBuild’—a document that combines everything: taxation of income from digital platforms, taxation of international parcels, VAT for sole proprietors, and everything else. It is very important that they do this competently and in a balanced manner. For example, VAT for sole proprietors with an income of 85,000 euros, and only that this rule take effect in the year Ukraine joins the EU. As for digital platforms, there should be no mention of goods at all, so that no one even thinks about that OLX. As for the taxation of inexpensive international parcels, it should be scheduled to take effect, for example, in 2028,” the expert notes.
According to him, if the Ministry of Finance drafts a sound bill, then communicates it to lawmakers, meets separately with the factions, and meets separately with the committees, the chances of adopting all the IMF’s tax benchmarks together are very high.
Economic and Financial Reality
The aforementioned tax innovations have long been branded as “extremely unpopular among the public.” The lawmakers themselves have also contributed to creating this unpopular image. Just look at the widely circulated public label “OLX Tax,” which does not at all correspond to the essence of the draft law on taxing income from digital platforms. Not long ago, in a comment to our publication, Oleg Getman, coordinator of the expert groups at the Economic Expert Platform, explained it this way:
“The tax does not apply to classified ad boards, does not apply to OLX, and does not apply to all used goods. This is just a scare tactic launched by some populist-minded MPs in parliament, and it does not correspond to reality. The tax will apply to those platforms that receive a commission for their services. That is, Uber, Bolt, Uklon, ‘Kabanchik,’ and so on. As for advertising platforms like Aviso and OLX, they don’t take a percentage; they simply charge a fee for posting ads, and people negotiate among themselves. This is a useful and positive project.”
Speaking about the importance of these tax measures, Oleg Getman points out, for example, that they level the playing field.
“Tax-free Chinese parcels are very harmful to Ukrainian manufacturers. There is no taxation for digital platforms, and 400,000 courier drivers work in the informal sector. Unfortunately, not all lawmakers understand this,” the expert notes.
But both government officials and IMF representatives still have arguments that could persuade lawmakers to make sensible decisions. For instance, there is an argument worth 26 billion hryvnias. These are the additional funds that could replenish the budget thanks to the adoption of just two decisions from the tax package.
Taras Marshalok, an analyst at the Center for Public Finance and Public Administration Analysis at the Kyiv School of Economics, explains.
“The fiscal impact of the tax package is significant. According to materials for the 2026 Budget, taxing income generated through digital platforms is expected to yield approximately 14 billion hryvnias. At the same time, according to calculations by the State Customs Service of Ukraine, revising the approach to taxing international postal shipments based on 2024 volumes could generate approximately 12.2 billion UAH in additional VAT revenue. “Thus, the combined additional fiscal effect of just these two initiatives could amount to approximately 26 billion UAH per year, or roughly 1.3% of all tax revenues in the state budget for 2025. For the current budget, this is a significant resource,” the expert notes.
The Ukrainian budget could count on a significantly larger amount if the IMF lending program is extended. And this will happen if the Ukrainian parliament confirms its willingness to work with the Fund through its decisions. Viktoria Klimchuk, an analyst at the Center for Public Finance and Public Administration Analysis at the Kyiv School of Economics, continues.
“In February, the IMF approved a new 48-month Extended Fund Facility for Ukraine in the amount of $8.1 billion. Moreover, Ukraine has already received the first tranche of $1.5 billion (approximately 66 billion UAH). According to the plan, provided the program is implemented, Ukraine will receive an additional $1.3714 billion (approximately 60 billion UAH)—$685.5 million in June 2026 following a review of the program’s implementation in the first quarter of 2026, and $685.9 million in September 2026 based on the results of the first half of 2026,” the expert notes.
But the IMF’s “green light” for continued cooperation with Ukraine is not just a few extra billion dollars for the budget, but also a signal to other donors who look to the Fund. And this, as experts have calculated, amounts to approximately $20 billion that Ukraine can and should receive.
Author: Serhiy Vasylevych
