“A shot in the head”: Yuzhanina criticizes Hetmantsev’s idea of forced purchase of domestic government bonds

Nina Yuzhanina, a member of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, sharply criticized the proposal of Danylo Hetmantsev, head of the Rada’s tax committee, to make it mandatory for working Ukrainians to purchase government bonds, calling it manipulation. She emphasized that a significant portion of the funds raised through military bonds is not directed to the defense sector, and control over budget expenditures remains insufficient. In an exclusive commentary to UNN, she noted that this is an attempt to “feel” the attitude of society to further financial pressure.

Context

Under the pretext of increasing funding for the army, Danylo Hetmantsev, chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, who has repeatedly initiated  tax increases in Ukraine, proposed to oblige working Ukrainians to buy government bonds for 7% of their salaries. Experts criticize the initiative because of the additional burden on the population and possible negative consequences for the economy.

This is a very dangerous situation, and it is unlikely that anyone will believe and agree to adopt such a law – it will be a shot in the head for the Servants of the People if they take such a step. Today, after squandering the money, they shouldn’t even try to open this topic, because they will be kicked to death

She noted that the idea of obliging working Ukrainians to buy government bonds for 7% of their salaries and using the proceeds for the needs of the Armed Forces is a manipulation by Hetmantsev. According to Yuzhanina, not all of the funds that the state budget currently receives from the sale of these bonds are used to support the army.

In particular, according to her data, during the 1000 days of the full-scale invasion, the state budget received UAH 1.36 trillion (USD 36.8 billion) in equivalent through the issue of domestic government bonds.

However, according to a member of the Rada’s tax committee, not all of the state’s own revenues are directed to the Armed Forces. “At first, we counted 100 billion hryvnias or more of “walking” money in the revenue side that could be used. The Minister of Finance explained something, but we never understood why not all taxes, not all domestic borrowings through military government bonds are directed to the defense sector. We never heard an explanation,” Yuzhanina said.

At the same time, she said, Hetmantsev’s use of Israel as an example of attracting citizens’ investments in government bonds during the war is not correct in relation to Ukraine. After all, the main principle of the Israeli authorities is rational spending of budget funds. That is, they have strict control over budget expenditures, and in order to win, all possible funds were directed to finance the security and defense sector. Yuzhanina believes that Ukraine should do the same.

The MP noted that Hetmantsev’s idea to oblige Ukrainians to buy government bonds  is a test of the waters.

“I think this is an unrealistic approach. I think this is a probing, a probing of the attitude of Ukrainians. And, unfortunately, I am very surprised by such manipulative polls that have been conducted and give trump cards to supporters of a tough attitude towards the population. Because when people are asked whether they agree with raising the military tax from 1.5 to 5%, of course, morally, people who suffer from the war cannot say that I am against it. Because people believe that they have to give almost everything to ensure defense. But few people understand and believe even that significant resources are being stolen from the budget… So, it is obvious that someone thought that this was not the limit. That it is possible to move on. And look for more money from people,” Yuzhanina said.

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Earlier, Myroslav Laba, tax and regulatory policy specialist at the Economic Expert Platform, CASE Ukraine Associate Expert, in an interview with UNN noted that additional costs in the form of mandatory purchase of government bonds could create an additional financial burden for the population, especially for low-income citizens and entrepreneurs, and called for alternative ways to finance public needs. Laba suggested focusing on combating the shadow economy and tax arrears instead of introducing new mandatory expenditures for citizens.

Vitaliy Shapran, a member of the Ukrainian Society of Financial Analysts, also sharply criticized Hetmantsev’s idea to introduce mandatory purchases of government bonds by working people. According to the financial analyst, the introduction of such an obligation will lead to an increase in the number of Ukrainian citizens leaving the country.

“Another idea of Hetmantsev (a student of Volodymyr Sivkovych) to force Ukrainians to buy government bonds at 7% of their income indicates that Danylo either has an acute mental disorder with an obsession to take a bite out of Ukrainians’ income, or a clear task from the Center from the FSB and Co. to constantly confuse Ukrainians with new ideas, indirectly agitating economically active citizens to leave Ukraine,” wrote Shapran on his Facebook page.

According to him, a compulsory obligation to buy domestic government bonds on the secondary market could lead to a number of negative consequences for Ukraine’s economy. The saturation of the market with bonds purchased by the population under pressure will inevitably lead to an increase in the yield of domestic government bonds on the secondary market, as many citizens will try to get rid of these assets. This, in turn, will force the Ministry of Finance to raise interest rates for new bond issues on the primary market, which will increase the cost of servicing the public debt and put an additional financial burden on the budget.

In addition, Hetmantsev’s proposal, according to Shapran, does not take into account the high costs of administering and opening securities accounts, which is a challenge for the banking system. In particular, the cost of opening and maintaining accounts for transactions with domestic government bonds may exceed the return on such investments for middle-income citizens. 

The financial analyst also believes that such an initiative will actually stimulate the transition to shadow salaries and minimization of official payments, as the mandatory percentage of income on government bonds can be perceived as an additional tax.

“Ukraine is a country with a market economy, and such coercion can hardly be called market-based. Leaders should prove the profitability of their operations by their own example. Mr. Hetmantsev’s annual declaration does not show that he or his family members are buyers of government bonds. On the contrary, I see a lot of foreign currency deposits and foreign currency cash. Therefore, it is strange to hear him talk about forced government bonds, especially since such reflections indicate that he has no idea how the government bond market works in Ukraine. And he, as the head of the Finance Committee of the Verkhovna Rada, should know this, at least at the end of his term,” Shapran added.

He called on the President of Ukraine and the Speaker of the Verkhovna Rada to immediately remove Hetmantsev from the post of the head of the Tax Committee of the Rada and “send him for a compulsory psychiatric examination.” 

“The people have to find out: Hetmantsev is either a fool with no economic education who has no one to stop him, or a traitor who is adding fuel to the Ukrainian economic crisis. In any case, Hetmantsev’s professional influence on the Ukrainian financial sector should be eliminated, preferably yesterday,” the financial analyst emphasized.