Raising taxes on luxury items in wartime conditions is the most justified step to increase budget revenues of Ukraine. About this in interview Dimitar Bogov, regional economist of the European Bank for Reconstruction and Development (EBRD) and former head of the Central Bank of the Republic of Macedonia, said to Interfax-Ukraine.
In his opinion, in the conditions of a military conflict, it is expedient to expand the concept of luxury items and temporarily increase taxes on certain categories of goods that are not essential to life.
“Currently, it is justified to raise taxes on some goods that are considered wartime luxuries. Products and services that are not critically important can be taxed at higher rates.”, – explained Bogov.
He also noted that the current state of war allows for a temporary expansion of the standard definition of luxury goods to include goods that would not normally fall into this category.
Discussing the general tax policy, Bogov emphasized that currently a significant part of the needs of the state budget is covered by foreign aid. However, he considers Ukraine’s desire to increase domestic revenues at the expense of tax revenues to be justified.
“We are in an extraordinary situation, and it is important that everyone feels their share of responsibility”, he added.
Bogov also commented on the possibility of raising the tax on excess profits of banks from 25% to 50%. He believes that this step may be appropriate, but the financial stability of the banking system must be taken into account. If banks have enough resources, they can afford to pay higher taxes without harming their stability.
The International Monetary Fund (IMF) supported the initiative to raise taxes in Ukraine. In particular, on September 16, the Verkhovna Rada’s Committee on Finance, Tax and Customs Policy approved the draft law on raising taxes for re-consideration in the first reading. And already on September 17, the Verkhovna Rada supported this draft law in the first reading.
