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The IMF criticizes the 50% tax rate on banks’ profits and advises Ukraine to increase its internal financing sources.

The IMF criticizes the 50% tax rate on banks' profits and advises Ukraine to increase its internal financing sources.

The deputy head of the IMF mission in Ukraine, Trevor Lessard, noted that the introduction of a 50% tax on bank profits for the second year in a row contradicts the nature of taxing excess profits, undermines trust in politicians, and is not an effective solution.

“If you introduce a tax on extraordinary income more than once, then people will start to react, and you will start to lose confidence in the policy,” he said.

According to him, banks may change their profit policy in anticipation of another such increase. Lessard believes that the best way to increase budget revenues would be to raise taxes in an efficient long-term way that will pay dividends in the medium term.

Therefore, the IMF recommends increasing the VAT, improving the fairness of Ukraine’s tax system, and fully implementing the carbon import adjustment mechanism (CBAM). Lessard also emphasized the importance of bringing excise taxes, particularly on alcohol and tobacco, to EU-established indicators.

 

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