Ukraine wants to raise VAT to 21%: Koretsky explained where the additional money will go

In the draft state budget of Ukraine for 2027, the government has provided for an increase in the standard VAT rate from 20% to 21%. Part of the additional revenues are planned to be directed to the creation of a mechanism for insuring Ukrainian businesses against military risks.

Prime Minister Serhiy Koretsky stated this in an interview with TSN.Tyzhden.

According to him, due to regular Russian missile and drone attacks, enterprises are suffering significant losses, which affects not only the business itself, but also the economy and state budget revenues.

They want to allocate $1 billion for business insurance

The government plans to create a special fund from which enterprises will be able to promptly receive compensation for losses caused by Russian attacks.

To launch the mechanism, Ukraine must make an initial contribution of about $1 billion. The government, in particular, explains the proposal to increase VAT by the need to find funds for its formation.

“Unfortunately, there are no other sources,” Koretsky said, commenting on the planned tax increase.

In the future, the Cabinet expects to attract international partners to the fund. It is expected that they will be able to increase its financing by about four times, and the total volume of the fund will be about $5 billion.

Businesses are promised faster compensation

The new mechanism should make insurance against war risks more accessible to Ukrainian enterprises and reduce the need to re-insure such risks abroad.

According to the prime minister, traditional insurance against war risks remains expensive, and receiving payments can take a significant amount of time.

The proposed mechanism should allow businesses to receive compensation faster after confirming the fact of destruction.

Currently, Ukraine does not have a universal state program that would fully compensate private businesses for all losses from Russian shelling. At the same time, separate mechanisms for insurance of property against war risks and programs to support enterprises operate.

Thus, if the relevant budget provisions are adopted, the standard VAT rate may increase from the current 20% to 21%.