Ukraine boosts defense budget, hikes taxes to fund war effort

Prime Minister Denys Shmyhal emphasized that the main goal of the state budget is to protect the country by increasing funding for security forces, purchasing weapons, and producing drones and military equipment. A significant portion of the expenditures is earmarked for soldiers' salaries, highlighting the importance placed on the defense sector.

President Volodymyr Zelensky signed a law increasing the war tax to 5 percent for residents starting in December and introduced it for private entrepreneurs. These measures aim to bring an additional $3.2 billion to the budget, which, as Finance Minister Serhiy Marchenko emphasizes, is crucial for funding defense 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 the 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 following an earlier 70 percent increase in 2024.