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Tax Gap for the Army: How the Energy Crisis Affects Ukraine's Budget Revenues

Енергетична криза та її вплив на фінансові надходження держави: проблеми армії в умовах скорочення бюджету. Photo: Залізний нардеп

Problems with electricity supply, water, and heating are directly affecting not only the daily lives of Ukrainians but also the state's ability to fill the budget. Due to the shutdown of enterprises and a drop in economic activity, Ukraine is missing tens of billions of hryvnias in tax and customs revenues that should go to fund the army. This was stated by the 'Iron MP' Yaroslav Zheleznyak.

According to him, domestic revenues are becoming critically important as international partners mostly do not finance defense expenses, and external aid comes with delays.

Tax Revenues for the Army: Where the Problem Arises

According to preliminary estimates, the state is missing out on 60 to 70 billion hryvnias in taxes. The reasons are obvious:

  • massive electricity supply restrictions for industry;

  • shutdown or reduction in the operation of enterprises;

  • decline in imports and consumption;

  • problems for small and medium-sized businesses, which have also started to close.

Due to power outages and water issues, businesses are forced to operate on generators or cease operations entirely, which directly reduces the tax base.

Budget-2025 and the Energy Factor

The budget for the current year was planned based on normal tax revenues, without accounting for the large-scale problems in the energy sector. Meanwhile, the deficit for the army's needs is already estimated at around 300 billion hryvnias. At the beginning of the year, the options to cover this gap are limited:

  • resources for external financing are nearly exhausted;

  • support from the European Union and the IMF is delayed due to unmet conditions;

  • domestic revenues are decreasing faster than expected.

Economic slowdown, according to the deputy, means less consumption, less fuel, less services, and as a result, less taxes.

What This Means for the State

Failure to meet the income plan creates risks for:

  • purchasing weapons;

  • payments under already concluded contracts;

  • funding for other critical expenditures.

Experts emphasize: without stabilizing the energy sector and revisiting budget priorities, financial pressure will only increase.

It should be noted that energy workers explained the reasons for emergency outages. DTEK reported a critical situation with electricity supply in Kyiv following attacks that damaged important generation and electricity transmission facilities.