Ukraine’s Financial Stability: Council’s Response to Proposed Bank Profit Tax Increase
Amid recent changes in financial policy and budgeting, Ukraine’s Financial Stability Council expressed cautious views regarding the initiative to raise the profit tax for the banking sector.
According to official reports, this council, comprising key regulators in the financial industry, believes that increasing the tax rate to 50% by 2026 will likely have a less significant fiscal impact than its proponents assume.
They emphasize that the anticipated fiscal effect will probably be significantly lower than publicly announced, and highlight several risks associated with implementing this initiative.
These include restrictions on banks’ credit and investment potential, complications in privatizing state banks, and the failure of some state banks to fulfill capitalization programs.
It is also worth reminding that Ukrainian banks have already paid higher taxes twice: in 2023 — amounting to 77 billion hryvnias, and in 2024 — 96 billion hryvnias.
If the bill passes second reading, new taxes will be levied in 2026.
Additionally, the head of the tax committee, Deputy Danilo Hetmantsev, who is the author of the initiative, claims that the tax increase is justified, as current sources of income for Ukraine’s banking system primarily come from operations with deposits and government securities, not just lending activities.