Finance Ministerʼs stance on military levy increase: Countries making tough decisions win wars

In a column for LB.ua, Finance Minister Sergii Marchenko has urged the Ukrainian parliament to support the bill on increasing the military levy, saying that this is a difficult but necessary step.

"The war is relentless and it continues. Therefore, we must respond to new requests from the Defense Forces and other military departments for additional funding. This need amounts to 500 billion hryvnias ($12.09 billion)," Marchenko wrote.

The main source of financing for additional military needs will be domestic borrowing (220.1 billion hryvnias, or $5.32 billion).

Part of the needs will be covered by the actual overperformance of state budget revenues in the first half of 2024 (75.8 billion hryvnias, or $1.83 billion), expenditure cuts (65.7 billion hryvnias, or $1.59 billion), and the already approved increase in fuel excise tax (16.9 billion hryvnias, or $409 million).

The remaining 121.8 billion hryvnias ($2.94 billion) is expected to come from increasing military levy rates.

"International experience shows that countries that make tough decisions on time win wars," Marchenko said, commenting on this proposal.

As an example, he cited Great Britain, which during World War I managed to significantly increase tax revenues by raising the income tax rate from 6% to 30%. This allowed the country to secure substantial funds for financing military expenses. In the US during the same war, the marginal tax rate increased from 7% to 77%, which also contributed to a significant increase in revenues.

World War II again confirmed this principle. In Great Britain, the maximum income tax rate rose to 97.5%. In the US, the tax on the lowest income level increased from 4% to 23%, while taxes on excess profits reached up to 94%.

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