The IMF advises Ukraine to increase VAT and luxury taxes in 2026
Kyiv • UNN
The Ukrainian delegation discussed with the IMF increasing revenues to the 2026 budget, including increasing VAT and switching to a progressive personal income tax scale, as well as de-shadowing the economy.
The Ukrainian delegation returned from the Spring Meetings 2025 of the IMF and the World Bank, which took place in the USA at the end of April. One of the key topics was increasing Ukraine's self-sufficiency in financing the state budget for 2026. In particular, there was talk about increasing taxes, said three Forbes Ukraine interlocutors who participated in the meetings, writes UNN. What exactly is it about?
A gift for true leaders
Forbes Certificate - 365 days of access to quality analytics, insights and success stories that change thinking. Buy now
Financing of the state budget-2026 is one of the central topics of negotiations between the delegation of Ukrainian high-ranking officials at this year's Spring Meetings of the World Bank Group and the International Monetary Fund (WB and IMF). The "Meetings" took place on April 21–26 in Washington.
This event brings together dozens of heads of central banks and finance ministers of IMF and WB member countries. Ukraine was represented by Prime Minister Denys Shmyhal, Minister of Finance Serhiy Marchenko and NBU Governor Andriy Pyshnyy together with their teams. "We have a potential additional resource even without raising taxes in 2025," emphasized Minister of Finance Serhiy Marchenko in a written response to Forbes Ukraine. – We were already focusing on 2026."
Raising taxes was indeed the focus of discussions between representatives of Ukraine and the IMF, according to Forbes Ukraine interlocutors who participated in the relevant meetings. The discussion concerned increasing the value added tax (VAT) rate, switching to a progressive personal income tax (PIT) scale and strengthening the shadow economy. A separate issue is the full confiscation of frozen Russian assets for the benefit of Ukraine, the Minister of Finance said.
What is the probability of another wave of tax increases and what other important topics for Ukraine were discussed at the Spring Meetings 2025?
About budget financing in 2025 and 2026
The NBU has significantly improved its assessment of expected international aid inflows for this year following the first quarter: from $38.4 billion to $55.1 billion. The need for external financing for 2025 is $39.3 billion, according to the Ministry of Finance.
"We expect to direct other attracted funds to the needs of next year," Minister Marchenko noted in a written comment to Forbes Ukraine. In particular, part of the funds from the G7 countries will be directed within the framework of the ERA initiative, he specified.
"We discussed various ways to increase revenues to the state budget with the IMF," the Minister of Finance said. – Our position is that we must improve tax administration."
According to him, budget revenues for the first quarter of 2025 exceeded the planned revenues by $1 billion, and Ukraine has an additional financial resource even without raising taxes this year.
"We are working on a joint plan to balance the 2026 budget under various scenarios," Marchenko wrote. The Ministry of Finance, together with the IMF, considered two scenarios for the development of the financial and economic situation, assessing the need for support and risks in 2026: in the event of the end of active hostilities and in the event of their continuation, the minister said.
Even if the intensity of the war decreases, Ukraine will not be able to sharply reduce military spending, Marchenko expects. "The threat from Russia remains high, and spending on social support and assistance to war veterans will increase," he explains. It will be extremely difficult to return to the pre-war level of military spending, the minister states.
During the meetings in Washington, the Ukrainian side focused on the issue of using all frozen assets of the Russian Federation for the benefit of Ukraine. "We need to move this issue forward now," the minister said in a written response. He did not specify whether any significant progress had been made in this regard.
A substantive conversation between Ukrainian officials and IMF representatives concerned the mobilization of additional domestic revenues to the 2026 budget. In particular, there was talk about a possible increase in VAT, said one of the Forbes Ukraine interlocutors who participated in the relevant consultations. This information was confirmed by two other officials involved in the discussions. The interlocutors spoke on condition of anonymity, as they are not authorized to make public comments on this topic.
Among the potential initiatives for greater budget replenishment next year in Washington, a transition to a progressive personal income tax scale was also discussed, according to two interlocutors. This approach involves higher tax rates for people with high incomes. A "luxury tax" was also mentioned in passing, two officials noted. "But we talked much more about the shadow economy," emphasizes one of them.
The IMF is particularly concerned about possible tax evasion through the simplified system, said one of the meeting participants.
The progressive personal income tax scale and the reform of the simplified system are positions indicated in the National Revenue Strategy until 2030, which the government approved at the end of 2023.
There was no specific information on when and how the rates of the above-mentioned taxes could be changed during the meetings, fiscal measures were discussed at the level of ideas, says one of the officials.
"Financing 2026 is a challenge that we must work on," said NBU Governor Andriy Pyshnyy during a conversation with a Forbes Ukraine reporter. – At one time, 2024 and 2025 were such a challenge."
The government team is consulting with international partners on this issue, says the head of the National Bank. "I would give the Ministry of Finance the opportunity to do what they see fit," he summarized.
Head of the NBU Andriy Pyshnyy, Prime Minister Denys Shmyhal and Minister of Finance Serhiy Marchenko during a visit to Washington in one of the past years
The head of the National Bank and the Minister of Finance mentioned the budget declaration for 2026-2028, which, according to the memorandum with the IMF, must be registered in the Rada by the end of June this year.
According to Marchenko, the document will include various scenarios for the development of events and the government's response to certain risks.
Trump's influence on the WB and the IMF and other topics in focus
There has been no change in rhetoric on the part of the Fund or the World Bank after the arrival of the Donald Trump administration in the White House, according to representatives of the Ministry of Finance, the National Bank and the Verkhovna Rada who participated in the Spring Meetings 2025.
"Unity in supporting Ukraine is what united everyone we spoke to at the Spring Meetings," Marchenko noted in a written comment. – Both European partners, and the IMF with the WB, and the USA, which is clearly reflected in the statement of the Ministry of Finance of the United States."
The Minister of Finance noted that all joint projects with the World Bank are being implemented without changes, and the development of new ones is also underway.
Pyshnyy and Marchenko assessed the atmosphere in Washington as constructive, while the head of the National Bank noted the increased uncertainty due to the unfolding trade confrontations.
The main challenge remains the war, said Roksolana Pidlasa, head of the Verkhovna Rada's budget committee, in a written comment. "At all meetings, I emphasized that the end of the war in 2025 cannot be the only scenario on which we rely in forecasting budget revenues and expenditures," she said.
The IMF focused on issues of ensuring financial stability in Ukraine and the world, while representatives of the World Bank spoke about post-war reconstruction, economic growth and the fight against inequality, the Minister of Finance noted.
During meetings with the IMF and the WB, NBU representatives also paid attention to the development of capital market infrastructure, the strategy of working with distressed assets, the privatization of state-owned banks, the regulation of virtual assets and artificial intelligence, and war risk insurance.
A separate topic was the expected eighth review of the Extended Fund Facility (EFF) program with the IMF. "We are determined to ensure that the eighth review is as successful as all the previous ones," said NBU Governor Pyshnyy. We are talking about a tranche of $487.4 million.
By the end of June, Ukraine must approve the budget declaration for 2026-2028, appoint a permanent head of customs and conduct an independent audit of the National Securities and Stock Market Commission.
In the event of successful completion of the eighth review, there will be five more ahead, providing for financing of about $4.69 billion. The last, 13th review under the EFF Program, is scheduled for March 2027.
US Treasury Secretary Scott Bessent, commenting on the IMF's lending policy, noted that the Fund should focus on short-term programs "so that countries can quickly abandon the IMF's financial support".