The European Union is considering linking a portion of its financial assistance to Ukraine to the adoption of tax reforms, particularly concerning Value Added Tax (VAT) on foreign parcels.
This initiative is part of a broader €90 billion aid package, specifically involving a macro-financial program amounting to €8.4 billion. Sources indicate that for Ukraine to access these funds, it must pass legislation that expands the list of foreign parcels subject to a 20% VAT.
Reports suggest that Ukraine could receive the first tranche of aid as early as June, with subsequent disbursements expected in September and by the end of the year, contingent upon the implementation of necessary reforms.
According to Bloomberg, this requirement aligns with conditions set by the International Monetary Fund (IMF) for a forthcoming $700 million aid tranche. The European Commission is coordinating some of the funding conditions with IMF stipulations.
Valdis Dombrovskis, the EU Commissioner for Economy, stated that the program aims to “strengthen Ukraine’s economic and financial resilience,” while also supporting reforms and anti-corruption efforts.
However, the proposed tax changes have faced backlash among Ukrainians. Lawmaker Yaroslav Zheleznyak expressed to Bloomberg that he currently does not see sufficient support for such a decision within the Verkhovna Rada, noting that at least 226 votes out of a possible 392 would be required.
The Ukrainian Ministry of Finance has confirmed that discussions regarding the final terms of the agreement with the EU are ongoing. Spokesperson Dmytro Gerasymenko stated that the government continues to negotiate the parameters of the financial assistance before submitting the document for parliamentary ratification.
Bloomberg also reported that the IMF and EU have agreed to postpone another sensitive tax reform aimed at expanding the number of entrepreneurs liable for VAT. A final decision regarding the parcel tax requirement may be reviewed by the fund at the end of May.
The EU is linking part of its financial aid to Ukraine to tax reforms on foreign parcels, with potential disbursements contingent on legislative approval. The proposed changes have met resistance in Ukraine's parliament.
Source: Bloomberg