Presidential business council opposes Cabinet's idea to raise taxes

Two of the seven members of the Council for Business Support in Martial Law, established by President Volodymyr Zelenskyy, opposed the Cabinet's proposals to raise taxes. According to the founder of Ajax Systems Oleksandr Konotopskyi and co-founder of monobank Oleh Horokhovskyi, this will lead to shadowing of the economy.

Bill No. 11416 proposes to increase the military levy from 1.5% to 5%, to extend it to sole proprietors and certain operations, such as the sale of jewelry, the purchase of bank metals or new cars.

"Taxes cannot be raised. This is an architectural matter. Neither citizens nor businesses are ready for this... Taxes in Ukraine must be reduced. And everyone should be taught to pay them. Then the revenue of the state will grow," wrote Konotopskyi on Facebook.

In his opinion, increasing the military levy by several times is a significant increase in the tax burden. For the IT service business, it will reduce the net profit by "dozens of percent", and small and medium-sized businesses will go into the shadows.

The founder of Ajax Systems called the proposal to introduce a military levy of 1% of company revenues a "Ukrainian miracle" and fiscal know-how, and also criticized proposals to increase taxes for sole proprietors, because it could kill the future of Ukrainian startups.

"I'm not even saying that (in the Diia City regime) taxes have been fixed in the constitution for 25 years. And in essence, the proposed law violates this, and Ukraine will have two conflicting tax laws," added Konotopskyi.

The co-founder of monobank Oleh Horokhovskyi reacted to the proposal of the Cabinet by paraphrasing a quote from "The Godfather".

"Now listen... Anyone who comes to you with a proposal to raise taxes in a warring country is a traitor," he wrote on Facebook.

In the comments to the post on the question of how funds were found during previous wars, Horokhovskyi wrote that "those who steal and loot during the war were shot."

The co-founder of monobank believes that it is necessary to administer the taxes that already exist, because the innovations proposed by the government look "like taxes on those who are still breathing."

Earlier, 13 analytical  centers proposed to the Cabinet of Ministers to increase the VAT instead of the military levy. Economists believe that the increase in the military levy threatens to decrease salaries, and its establishment for legal entities is generally discriminatory for domestic producers.

In response, the Ministry of Finance explained that the government does not want to increase the value-added tax, because it will lead to an increase in the prices of all goods and services and will become an additional burden for vulnerable categories of the population.

Minister of Finance Sergii Marchenko called on the Verkhovna Rada to support the bill on increasing the military levy to finance the army. This is a difficult but necessary step, he argues.

Russia has already raised taxes to finance the war against Ukraine. The aggressor state did this by introducing a differentiated personal income tax rate (PIT) and increasing the income tax.