A large-scale fiscal act: the IMF makes strict demands on Svyridenko

Prime Minister of Ukraine Yulia Svyridenko and Managing Director of the IMF Kristalina Georgieva

A significant part of unpopular fiscal demands from international partners decided to combine in a single bill. However, for its approval, the government will have to find agreement with parliamentarians. In the UP edition, they analyzed the prospects for success.

During the extreme visit of IMF managing director Kristalina Georgieva to Kyiv in January, government representatives and elected officials tried to convince her to soften some of the IMF’s demands. Especially those related to the adjustment of tax rules. In particular, it is about:

• adoption of the law on the cancellation of the preference for duty-free import of international shipments with a value of up to 150 euros;
• adoption of the law on taxation of profits from digital platforms (it is often called the “OLX tax”);
• fixing the military levy rate at 5% on a permanent basis (now it is assumed that the levy rate will decrease to 1.5% from January 1 of the year following the end of martial law);
• adoption of a decision that will prohibit FOPs-payers of the simplified taxation system from participating in state tenders;
• submission to the Council of a draft law on the introduction of value-added tax for FOPs;
  submission of a draft law on the introduction of labor relations criteria in order to overcome the scheme of using FOPs instead of hiring.

Although the volume of the program with the IMF is small – “only” 8.2 billion dollars, distributed over the next 4 years – but without it, Ukraine will not be able to receive financing from other partners. In particular, EUR 90 billion from the European Union is the main source of covering the budget deficit and the purchase of weapons for the next 2 years. Therefore, there is no alternative in Ukraine to fulfill all the promises.

One big law and a small bonus There is a political crisis in the parliament. Many deputies are involved in the game: “the worse the government is, the better.” Due to the difficult situation with gathering the necessary 226 votes, they decided to combine a significant part of the unpopular fiscal demands into a single draft law. EP insiders in the parliament have already managed to christen it “one big tax law” – by analogy with “One big wonderful law”, the approval of which was demanded by the US Congress in 2025 by Donald Trump.

The Ukrainian version of the One big beautiful bill will include a tax on digital platforms, the cancellation of the exemption for tax-free importation of international parcels and the fixing of the military tax rate at the level of 5%. All these rules are intended to be included in the draft law on taxation of digital platforms between its first and second readings.

“The appropriate adjustments will be made by the government,” one of the deputies of the Rada expresses his hope anonymously.

How to gather votes for such unpopular changes? Most likely, in order to stimulate the deputies to support the increase in taxes, they will be offered a “bonus”. Three EP sources in the Council and the leadership of “Servants of the People” call the cancellation of the indefinite PEP (politically exposed person) status a “bonus”.

“This is a really difficult issue for MPs, because this status actually makes it impossible for them to interact with most banks. For example, Privatbank simply blocks the accounts of PEPs altogether. Because of this, no one here wants to go into public service,” one of the MPs, who is aware of the plans to review this status, told the EP.

It is not the first time that deputies have tried to get rid of the indefinite status of PEP. In the fall of 2022, they voted in favor of an amendment that kept PEP status for only 3 years after retirement, rather than for life. However, later, with great efforts and under pressure from the same IMF and other partners, the indefinite status of PEP was returned.

Apparently, the PEP amendment will be in the same draft law as the cancellation of benefits for international shipments and taxation of digital platforms. According to the plan, it will also have to be submitted by the government between the first and second readings of the document.

It is still unknown whether the “sweet bonus” will be included in the “bitter” tax changes. People’s deputies are going to consider the “big tax law” in the first reading in early February. Only after that, all amendments will be made to the draft law, which the representatives of the government will agree on with the deputies.

Compromise on VAT for FOPs The most controversial demand of the IMF is the introduction of value added tax for FOPs. However, unlike the allowance for parcels, the military levy or the taxation of digital platforms, the bill on VAT must not be adopted as a whole, but only submitted to the Council. Therefore, this norm was never included in the “big tax law”.

On December 18, the Ministry of Finance published the text of the draft law on VAT for FOPs. After a public discussion, the government was supposed to submit the document to the Council in mid-January. However, the relevant decision was not adopted.

Moreover, the Cabinet of Ministers adopted a resolution introducing special one-time payments in the amount of UAH 7.5-15 thousand to FOPs due to problems with electricity. Not only the representatives of the government, delaying the submission of the relevant draft law to the parliament, but also representatives of business and analytical centers oppose the demand to introduce VAT for FOPs. It is possible that the final version of this document will not be as strict as currently proposed.

It is still unclear whether international partners will agree to all the relaxation of tax requirements. Especially if, together with them, the Council “steps on the same rake” and once again tries to cancel the indefinite status of PEP. However, the time for adopting all the necessary changes coincides: without the IMF program and the EU funding linked to it, the funds in Ukraine will run out already in April.