Redistribution of military PIT to allow for up to 120 billion in weapon production – Ukraine's PM

The Cabinet of Ministers of Ukraine has submitted a law to the Verkhovna Rada (the parliament), which proposes to transfer the military personal income tax (PIT) from local budgets to the purchase of equipment and own production of weapons.

Source: Prime Minister of Ukraine Denys Shmyhal

Quote: "Ukraine should increase the production of its own drones, weapons and ammunition.

For this purpose, the Cabinet of Ministers has submitted a draft law, which proposes that the military personal income tax – a tax paid by the state for the military – will be used for the purchase of equipment and its own production of weapons."

The revenues of local budgets from the military income tax have increased eightfold since the beginning of the full-scale invasion. For 2023, the forecasted amount will be more than UAH 96 billion [about US$2.6 billion – ed.]; for comparison, revenues from this sector amounted to about UAH 12 billion in 2021 [about US$0.32 billion – ed.].

Shmyhal emphasises that the growth has occurred solely because the state increases spending on the defence industry and military salaries.

"The government draft law will allow us to attract UAH 25.8 billion [about US$0.69 billion – ed.] this year and UAH 93.7 billion [about US$2.54 – ed.] next year for additional purchases of drones and to increase the production of own weapons," the head of government said.

At the same time, more than UAH 200 billion [about US$5.14 – ed.] that have accumulated in the accounts of local budgets and budget institutions will remain at the disposal of local authorities. For those communities that objectively lack funds, the state will provide a basic subsidy and leave a reverse subsidy.

This way, the resource of local budgets in 2024 will be UAH 75 billion [about US$2.03 – ed.] more than in 2021 before the full-scale invasion.

Background:

• The draft state budget for 2024 will not be accompanied by a draft law on introducing tax changes to increase revenues.

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