Ukraine Parliament Fails to Pass Parcel Tax Law Tied to IMF, EU Aid

Ukraine Parliament Fails to Pass Parcel Tax Law Required for IMF, EU Funds

Ukraine’s Struggle to Secure International Funding Amid Legislative Deadlock

By Olena Harmash

Parliamentary Vote on Parcel Tax Law

KYIV, Sept 1 (Reuters) – Ukraine’s parliament failed on Tuesday to pass a law to introduce taxes for foreign parcels that is required to unlock IMF and EU funds, dismissing government warnings about growing financial risks and a shortfall in funding for defence needs.

Government Warnings and Financial Risks

Prime Minister Sergii Koretskyi said Ukraine faced a $27 billion deficit for its defence needs and financial risks were mounting. He called on lawmakers to speed up voting on key reform legislation.

An IMF monitoring mission is in Ukraine this week to review its lending programme.

Statements from Prime Minister Koretskyi

“We have $30 billion – this is the amount we can, and should receive from our partners this year, provided we fulfil the commitments we have made. The relevant decisions are in our hands …” Koretskyi said at the start of a parliamentary session.

“Not all decisions that we agreed with our partners have been made, and our obligations to them have not been fully met. Unless these issues are resolved, the country may face significant financial risks.”

The government needed 226 votes for it to pass but got only 194. It was not immediately clear how many lawmakers voted against the bill, or were absent from the session.

Debate Over Parcel Tax and Cost of Living

SOME LAWMAKERS POINT TO COST OF LIVING

The issue of taxing foreign parcels has become very sensitive in Ukraine’s talks with its lenders.

Current Tax Exemptions and Potential Revenue

Currently, parcels containing goods worth less than ​€150($175) are not subject to taxes in Ukraine. Introducing the tax would generate around 10 billion hryvnias ($227.53 ‌million) ⁠annually, the finance ministry has previously said.

Concerns Among Lawmakers

Some parliamentarians fear that new taxes would further raise the cost of living for people already battered by the war. Others argue that it will help domestic producers by helping reduce consumer imports.

Implications for IMF and EU Funding

Danylo Hetmantsev, head of the parliamentary committee for finances, taxes and customs, said that the price of the failure to pass the legislation was about €4 billion from the EU and the IMF.

It was not immediately clear what he based that figure on. The next tranches of funds are due to be determined in the review.

Warnings of Financial Disaster

“A financial disaster is not just around the corner. It is already in the room,” he said on the Telegram app after the vote.

Wider Economic and Security Context

As the war with Russia drags on and gets more expensive, financial challenges mount for Ukraine.

Impact of War on Economy and Infrastructure

Russia intensified its strikes on Ukrainian cities and infrastructure, and wartime damage to businesses and the economy is growing. The capital Kyiv was under the sixth consecutive day of Russian strikes on Tuesday.

(Reporting by Olena Harmash; Additional reporting by Anna Pruchnicka and Yuliia Dysa; Editing by Alison Williams)