Ukrainian govt proposes to increase defense spending in 2024 budget by $12 bln

MOSCOW. July 19 (Interfax) - The Ukrainian government proposes to increase 2024 state budget spending on the security and defense sector by UAH 500.3 billion ($12.1 billion at the current rate) with a decrease in the cost of servicing public debt due to restructuring by UAH 65.7 billion($1.6 billion).

Ukrainian media reported that government bills on amendments to the 2024 state budget regarding the financial support of the security and defense sector and amendments to the Tax Code and other laws on the specifics of taxation during martial law were registered in parliament on Thursday evening.

Ukraine's parliament has passed a 2024 budget with a deficit of UAH 1.57 trillion or 20.6% of forecast GDP. Budget revenues are expected to total UAH 1.77 trillion, not including potential financial assistance, and spending UAH 3.36 trillion, with UAH 1.69 trillion or 22.1% of GDP for security and defense.

According to the government's amendments, it is proposed to increase spending on military, special equipment and machinery by UAH 256.2 billion, on the construction of military engineering and fortification structures - by UAH 40.4 billion and on wages by UAH 77.9 billion.

The expenditures will be backed by UAH 214.5 billion in additional revenues and UAH 220.1 billion in additional financing: UAH 160.2 billion increase in the sale of government bonds to banks and UAH 59.8 billion reduction in payments to repay state debt.

"The implementation of the act will lead to an increase in the maximum volume of the state budget deficit by 2.8% of GDP and the maximum volume of public debt by UAH 220.1 billion," an explanatory note says.

Proposed 2024 state budget revenues are UAH 1.983 trillion, including UAH 1.811 trillion for the General Fund which receives taxes and other dues and finances the main spending items, and expenses UAH 3.748 trillion and UAH 3.547 trillion, respectively. The maximum deficit is UAH 1.792 trillion and UAH 1.729 trillion, while the maximum public debt is UAH 7.680 trillion.

As for the bill on amendments to the Tax Code, the Finance Ministry said it assumes an increase in tax revenues this year by approximately UAH 125 billion in addition to an increase in excise taxes on fuel and tobacco products, which should bring in another UAH 9.8 billion and UAH 3.8 billion respectively.

The government's main initiatives include an increase in military tax on personal income from 1.5% to 5% (the estimated additional income is about UAH 45.5 billion) and military tax payment by individual entrepreneurs in the amount of UAH 400 per month (UAH 2.3 billion). Other include increasing or introducing, where it currently does not exist, military tax of 5% for mobile communications (UAH 0.9 billion), the purchase of bank metals (UAH 0.02 billion) and real estate (with the exception of one object per year) (UAH 1.2 billion), 15% for the purchase of passenger cars for their first registration in Ukraine (UAH 10.2 billion) and 30% for the purchase of jewelry with payment by retailers (UAH 0.14 billion).

Other innovations include the monthly payment of advance contributions for corporate income tax by fuel retailers, establishing a specific excise tax rate of EUR 0.1 per liter of drinks with added sugar or other sweeteners and lowering the threshold for duty-free parcels from abroad from 150 euros to 45 euros.