Bill No. 14025 Fails to Pass
The Verkhovna Rada, Ukraine's parliament, has voted down draft law No. 14025, which proposed a moratorium on new taxes for private entrepreneurs, known as FOPs. Only 168 deputies voted in favor, falling short of the 226 votes required for passage. The government had intended to amend the bill to align with conditions set by the International Monetary Fund (IMF), but these efforts failed to gain legislative support. This vote highlights the ongoing tension between meeting international lender demands and protecting a domestic business sector already strained by war.
Proposed Amendments and Reforms
The defeated bill centered on a freeze for raising or introducing new taxes for private entrepreneurs. Despite government attempts to revise it per IMF requirements, the vote was unsuccessful. Deputy Yaroslav Zhelezniak noted:
“Before the second reading, the government planned to submit amendments covering all other IMF demands: abolishing the tax exemption for parcels valued under €150; introducing VAT for FOPs; and formalizing an increased military levy at 5% after the martial law ends. But the Rada said no.”
The proposed amendments included:
- Eliminating the tax exemption for imported parcels worth up to €150;
- Introducing a value-added tax (VAT) for private entrepreneurs;
- Formalizing an elevated military levy at a rate of 5%.
Had the bill passed, it would have imposed VAT on FOPs with annual revenues exceeding 4 million hryvnias, taxed foreign parcels, and introduced a 5% levy on sellers using digital platforms like OLX.
Political and Economic Context
The Batkivshchyna party signed a Memorandum of Cooperation with the #SaveFOP movement, pledging to fight initiatives it views as harmful to entrepreneurs. The party stated its next targets for opposition are the taxation of sub-€150 parcels and the introduction of VAT for FOPs.
This legislative setback comes after Ukraine and the IMF agreed in November on a new four-year $8.1 billion lending program. Its conditions involve taxing income from digital platforms, taxing imported parcels, and introducing VAT for FOPs with income over 1 million hryvnias. These fiscal measures are seen as increasingly critical for Ukraine's budget stability as the economy faces immense wartime pressures.
The failure of bill No. 14025 carries significant implications for Ukraine's private entrepreneurs, who are navigating severe economic instability. With IMF requirements still pending, the government must now seek alternative solutions to secure budget stability, likely leading to new tax proposals. This outcome underscores the strained relationship between the government and the business community, which argues it needs support, not additional burdens, to survive the war and its economic fallout.