Ukraine boosts defence spending amid tax hikes and tensions

The Prime Minister of Ukraine, Denys Shmyhal, stated that the main goal of the state budget is to protect the country by increasing funding for security forces, purchasing weapons, and the production of drones and military equipment. Significant funding is allocated for soldiers' salaries, highlighting the importance placed on the defence sector by the authorities.

President Volodymyr Zelensky signed a law increasing the war tax for residents to 5 percent starting in December and introduced it for private entrepreneurs. These measures aim to bring an additional 4.4 billion Canadian dollars to the budget, which, as Finance Minister Serhiy Marchenko emphasizes, is crucial for funding defence in 2025.

The new regulations also affect commercial banks, which will now pay a 50 percent tax on profits. Other financial institutions will be required to pay 25 percent. This is another step in mobilizing funds for the reconstruction and economic development of the country, affected by war and the mass emigration of citizens abroad.

The deepening conflict with Russia has had a catastrophic impact on the Ukrainian economy, destroying infrastructure and forcing millions of citizens to emigrate. In response to the growing threat, Russia plans to increase military spending by 30 percent in the coming year after an earlier 70 percent increase in 2024.