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The negative consequences of doubling the military tax rate,
How to ensure that all we pay to the army is really spent on the army

13 May, 2022 Blog

The draft laws of the “7311” series (for example, the draft law No. 7311-д as of May 1, 2022) provide for a doubling of the military tax rate by making respective amendments to the Tax Code of Ukraine.

No one doubts the need for the proper defense funding. The only question is whether the proposed step will be relevant or whether it will actually do more harm.

It is worth to mention the right granted to the Cabinet of Ministers of Ukraine to redistribute budget funds in favor of defense. And in this way the main task may be to increase budget revenues as a whole, rather than a separate tax. Doubling the military tax may have an inactive effect in this regard, given all the consequences.

For many companies, that have shut down or significantly reduced their activities, payment of wages to employees is a heavy burden now. Instead of helping companies keep their employees during difficult times, the state is trying to complicate this by increasing the burden on the payroll.

In addition, the recent publication on the “Ekonomichna Pravda”(Economic Truth) web-site says that, revenues from the military tax are not credited to the needs of the Armed Forces of Ukraine directly, but to the general state budget.

In fact, revenues that were collected as a military tax did not necessarily go to the needs of defense, but to the purposes determined by the deputies when adopting the budget law for the respective year.

We consider it worthwhile to legislate for taxpayers, at least during martial law, the possibility to pay both military duty and national taxes in general (including in advance) directly to a determined account of the Armed Forces of Ukraine or the Ministry of Defense of Ukraine (with notification of the State Tax Service), and recognize this as due payment of taxes. The targeted nature of these funds should be established at the legislative level and their redistribution to other needs shall be prohibited. Then the taxpayers will be sure that what they have paid will really go to the needs of defense, and not to some other current whims.

The full version of the article is available in Ukrainian by the link.

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