The European Union is considering introducing stricter conditions for a 90 billion euro loan to Ukraine, which would make some payments dependent on the implementation of an unpopular tax change for businesses, Bloomberg reports, citing sources familiar with the matter, according to UNN.
Details
The plan being discussed by the European Commission, the EU's executive arm, would affect 8.4 billion euros of so-called macro-financial assistance expected to be provided this year under the program.
This effort coincides with Ukraine's attempts to persuade another major donor, the International Monetary Fund, to at least delay the introduction of the same requirement for unlocking more aid under a separate loan program worth over $8 billion, the sources said.
Ukraine needs to approve a tax on parcels to maintain funding from the IMF - media28.04.26, 22:30
The discussion focused on changes to the preferential tax regime currently applied to certain Ukrainian companies. Originally designed for self-employed entrepreneurs and small businesses, it allows firms to pay a minimum rate of 5% of income. According to Ministry of Finance estimates, this change would add over 40 billion hryvnias ($907 million) to the budget annually.
The Ministry of Finance and Ukraine's main donors argue that this system drains the wartime budget, distorts competition, and helps maintain a significant shadow economy.
According to sources, the proposal would require authorities in Kyiv to introduce a 20% value-added tax for those companies currently operating under the preferential system whose annual income exceeds 4 million hryvnias.
The EU aid potentially affected by the new conditions represents only a portion of the total two-year package, which amounts to approximately 60 billion euros in defense support, with the remainder divided between macro-financial assistance and the Ukraine Facility, which provides funds for general budget expenditures.
European Commission spokespeople stated that the Commission is "working tirelessly" to finalize the memorandum of understanding that will form the basis for the financing conditions for Ukraine, but declined to provide details.
The EU executive always coordinates its "reform agenda with the IMF, and that is the case now," according to a spokesperson. The goal is to conclude negotiations "as soon as possible with an ambitious reform agenda to strengthen Ukraine's economy" and accelerate its integration with the EU, the spokesperson said.
But, as the publication notes, this push is likely to cause tension in Ukrainian society, as the proposed measures are extremely unpopular.
Earlier, parliament openly challenged Zelenskyy by refusing to change the tax regime, including expanding the categories of foreign parcels subject to VAT, which is another requirement set by the IMF. Meanwhile, the President's Office accused the Ministry of Finance of being overly submissive to the IMF.
Further IMF disbursements depend on this and other fiscal tightening measures that Kyiv agreed to implement to limit the scale of the shadow economy. However, it has already missed a March deadline for legislative changes. It now has until June, when the next IMF review is scheduled to take place, the publication writes.
The Washington-based lender has already allocated $1.5 billion under the current program. The next tranche of about $700 million remains in question.
According to sources, as parliament reached a deadlock over passing the tax changes, Ukrainian officials and the IMF discussed a possible delay in implementing VAT measures for self-employed entrepreneurs for about a year during the lender's spring meeting earlier this month.
However, the IMF is still pushing for parliament to pass the VAT increase on parcels by June, they said. The Ministry of Finance stated on Monday that it would soon submit the relevant bill to parliament. Nevertheless, the prospects for passing the amendments look slim, one of the sources said.
Even if Ukraine manages to win some time now, it will eventually have to reform its tax system to bring it in line with EU rules during accession negotiations, the publication notes. This will include getting rid of certain benefits. For now, Ukraine's international donors may consider other measures to generate revenue or limit the shadow economy, one of the sources said.