The business community opposed the tax increase for Ukraine’s banking sector

25/ 09/ 2024

Listen to online Stop   The European Business Association, together with other leading business associations in Ukraine, including the American Chamber of Commerce in Ukraine, the Independent Association of the Banks of Ukraine, and the Forum for Leading International Financial Institutions, have addressed representatives of the Verkhovna Rada and the government of Ukraine with a joint position regarding draft law No. 11416-d, which proposes raising the corporate tax rate for banks to 50%. Draft law No. 11416-d aims to increase the tax burden on the banking sector in response to financial challenges caused by the war in Ukraine. A key component of this draft law is the retrospective increase in the corporate tax rate for banks to 50%, effective from the beginning of 2024. The business community expresses deep concern over this initiative, as it may have negative consequences for the countrys financial stability. Representatives of business associations emphasize that such a sharp increase in tax rates for the second consecutive year will adversely affect Ukraines investment attractiveness, especially in the context of the ongoing war and the challenging economic situation. The repeated increase in the corporate tax for banks could deter both international and domestic investors, who are already facing high risks due to military actions in Ukraine. In particular, this may reduce potential investors interest in participating in privatization, further jeopardizing Ukraines fulfillment of its obligations under the IMF Memorandum, which could, in turn, affect the countrys ability to secure new financial assistance from international partners. A predictable and stable tax policy is a crucial prerequisite for the development of the banking system. The introduction of retrospective changes to tax legislation contradicts international standards and creates legal uncertainty, which will only deepen the crisis in Ukraine’s economy. Business representatives highlight that imposing a 50% tax for the current and subsequent years, including bank profits for 2024, contradicts the principles of tax fairness. This approach not only undermines international investors confidence in Ukraine but also places banks in a situation where a portion of their profits will be retroactively seized, creating additional financial risks for the banking system. The business community urges the government and the Verkhovna Rada to refrain from making abrupt changes to tax policy, including raising the corporate tax on banks, and to ensure economic stability. Increasing the tax burden may reduce the ability of banks to finance the recovery of Ukraine’s economy, which is critically important at this time. The business community calls on the government to focus on supporting investment and ensuring the financial stability of the banking sector, which plays a key role in the country’s post-war economic recovery.

The European Business Association, together with other leading business associations in Ukraine, including the American Chamber of Commerce in Ukraine, the Independent Association of the Banks of Ukraine, and the Forum for Leading International Financial Institutions, have addressed representatives of the Verkhovna Rada and the government of Ukraine with a joint position regarding draft law No. 11416-d, which proposes raising the corporate tax rate for banks to 50%.

Draft law No. 11416-d aims to increase the tax burden on the banking sector in response to financial challenges caused by the war in Ukraine. A key component of this draft law is the retrospective increase in the corporate tax rate for banks to 50%, effective from the beginning of 2024.

The business community expresses deep concern over this initiative, as it may have negative consequences for the country’s financial stability. Representatives of business associations emphasize that such a sharp increase in tax rates for the second consecutive year will adversely affect Ukraine’s investment attractiveness, especially in the context of the ongoing war and the challenging economic situation.

The repeated increase in the corporate tax for banks could deter both international and domestic investors, who are already facing high risks due to military actions in Ukraine. In particular, this may reduce potential investors’ interest in participating in privatization, further jeopardizing Ukraine’s fulfillment of its obligations under the IMF Memorandum, which could, in turn, affect the country’s ability to secure new financial assistance from international partners.

A predictable and stable tax policy is a crucial prerequisite for the development of the banking system. The introduction of retrospective changes to tax legislation contradicts international standards and creates legal uncertainty, which will only deepen the crisis in Ukraine’s economy.

Business representatives highlight that imposing a 50% tax for the current and subsequent years, including bank profits for 2024, contradicts the principles of tax fairness. This approach not only undermines international investors’ confidence in Ukraine but also places banks in a situation where a portion of their profits will be retroactively seized, creating additional financial risks for the banking system.

The business community urges the government and the Verkhovna Rada to refrain from making abrupt changes to tax policy, including raising the corporate tax on banks, and to ensure economic stability. Increasing the tax burden may reduce the ability of banks to finance the recovery of Ukraine’s economy, which is critically important at this time. The business community calls on the government to focus on supporting investment and ensuring the financial stability of the banking sector, which plays a key role in the country’s post-war economic recovery.