The difficult situation with the 2024 budget justifies additional taxes for banks

The Verkhovna Rada plans to adopt a draft law on taxing excess banks profits.

Initially, the document envisaged an increase in corporate tax from 18% to 36%. However, it was amended for the second reading: profits for 2023 will be taxed at 50%, and from 2024 the tax will be 25%.

Such taxes on excess profits (windfall tax) are common in the world, it is not a know-how for Ukraine, says CES Senior Economist Yurii Gaidai to Forbes. And it is not only about the banking sector but also about the commodity industries.

The Ukrainian government chose the banking sector because it was the one that made excessive profits under martial law.

In the first nine months of this year, banks generated almost UAH 110 billion in profits (compared to UAH 77.5 billion for the whole of 2021).

This was made possible by the current monetary design, including high rates on certificates of deposit and government bonds.

Given the difficult situation with Ukraine’s budget for 2023 and 2024, the introduction of additional taxation of banks is justified, Yurii Gaidai comments.

The decision has its drawbacks, as long-term increased taxation may lead to higher client fees.

However, neither the US nor the EU have yet finalised financial assistance for 2024. Therefore, the search for internal resources is extremely relevant.

Source: Forbes