Economic boost: aircraft manufacturing returns 2.5 hryvnias to the budget for every hryvnia of benefits

Ukrainian aviation has been living in the reality of a “closed” sky for the fourth year. The new reality, which began on February 24, 2022, reset the business models of aviation enterprises in one day. Given the situation, it is easy to draw an emotional conclusion that the aviation industry in Ukraine has temporarily stopped working, and therefore paying taxes. However, aviation continues to fill the budget and “take the hit” despite the lack of state support. What needs to be done to stimulate the growth of the industry, read in the material of UNN.

Tax revenues from the aviation industryThe aviation industry of Ukraine is a significant taxpayer to the state budget. According to the Aerospace Association of Ukraine, only four leading aircraft manufacturing enterprises (JSC “Motor Sich”, “Antonov”, “Ivchenko-Progress”, “FED”) transferred 22.91 billion UAH in taxes to the budget in 2017-2023. The lion’s share of this amount was formed precisely in the pre-war years, when production worked without missile strikes, relocations, and forced shutdowns.

Already in 2017, the industry provided 1.63 billion UAH in tax revenues, and by 2020, the amount of paid taxes increased to 3.16 billion UAH, almost doubling.

And they emphasize that 2021 was the peak year for production dynamics before the sky closed: aircraft manufacturing enterprises increased production volumes by 30% compared to the previous year. And the average salary at these enterprises increased by an average of 28%.

The Association itself concludes that before February 24, 2022, the aviation industry was already among the “large taxpayers” – those who provide the budget not with hundreds of millions, but with billions of hryvnias annually, and do so systematically, not once.

Tax benefits and the effectiveness of state support for aircraft manufacturingThe tax stability of the industry was ensured not so much by air transportation as by aircraft manufacturing itself. This segment had a high level of development, and accordingly, financial returns, thanks to the so-called “fora” from the state.

After all, until December 2024, the aviation industry had tax preferences from the state, which stimulated its development. In 2017-2023, the total amount of tax preferences for four key enterprises amounted to 9.33 billion UAH. In particular, this includes exemption from profit tax on aircraft manufacturing, VAT at a zero rate on product sales, exemption from VAT on the import of equipment and components, exemption from import duties, and exemption from land tax.

Thanks to this, the “Motor Sich” enterprise received tax benefits from the state amounting to 4.38 billion UAH in 2017-2023, and paid 10.24 billion UAH in taxes to the budget during these years. That is, every hryvnia of benefits returned to the state in more than double the amount.

The same is demonstrated by “Antonov”. During the same period, the enterprise used tax benefits amounting to 3.47 billion UAH, while transferring 9.30 billion UAH in taxes. This is almost 2.7 UAH in tax revenues for every hryvnia of state support.

At the same time, the Aerospace Association of Ukraine explains that the funds that enterprises could accumulate thanks to tax preferences were not “eaten up”, but were directed to development. Up to 60% of the resources freed from taxation were invested by enterprises in production modernization, up to 20% – in research and development work, 10% – in training and professional development of employees. In monetary terms, for example, “Motor Sich” reinvested more than 8 billion UAH in the development of the enterprise over 7 years of tax benefits, and “Antonov” over the same period 3.76 billion UAH. That is why the cost of aviation products was reduced by 15-20%, and the energy intensity of production by 25-30%.

The development of the aviation industry also affects related areas. Every dollar invested in the industry creates up to four dollars of effect in related sectors – from metallurgy and electronics to the chemical industry. One job in the aviation industry provides up to ten jobs in related industries. This explains why, even in crisis conditions, enterprises have retained about 40,000 highly qualified employees, and from 2017 to 2023, created more than 3,000 new jobs.

Aircraft manufacturing as part of defense potentialAircraft manufacturing enterprises are critical to national security. They develop unmanned aerial vehicles and provide technical maintenance of aviation equipment for the Armed Forces.

2020 became a landmark year for the entire Ukrainian aircraft manufacturing industry: at the direct initiative and support of President Volodymyr Zelenskyy, the state for the first time placed an order for three An-178 military transport aircraft for the Armed Forces of Ukraine. This was not just a contract for the Antonov enterprise, but a signal that the state was betting on the revival of its own aircraft manufacturing. By ensuring the loading of production capacities, stimulating investment in modernization and expansion of production, and increasing the interest of foreign partners in Ukrainian aviation equipment.

Aircraft manufacturing is one of the few industries in Ukraine where a full cycle of development and production of complex equipment has been preserved. This is not only an economic asset, but also a matter of technological and defense sovereignty of the state.

Is industry development possible without tax preferences?The state’s refusal to support the aviation industry in the form of tax benefits has dealt a major blow to all achievements and gains. The Aerospace Association warns that without a preferential regime, investment programs will be reduced by 40-60%, the cost of aviation products will increase by at least 15-20%, and production volumes will fall by a third. However, if support is restored, over the next 10 years it can bring about 55 billion UAH in tax revenues, with preferences amounting to 18 billion UAH.

Only in 2025-2035, the industry is capable of providing the state with over 55 billion UAH in tax revenues with an expected amount of benefits of about 18 billion UAH. That is, every hryvnia of preferential support can bring over three hryvnias in taxes – significantly more than in pre-COVID years.

Ukrainian aircraft manufacturing is not a “budget expense”, but a strategic investment that pays off threefold, ensures the state’s defense capability, and preserves technological sovereignty. Refusal to support this industry will mean not only the loss of 55 billion UAH in potential tax revenues by 2035, but also the loss of Ukraine’s status as one of the few countries in the world with a full cycle of aircraft development and production. In the post-war period, these technologies and competencies can become one of the locomotives of economic recovery.