More than half of the seized personal income tax was not spent on the needs of the Armed Forces: how the «military» tax is used

how the withdrawn personal income tax is used. Photo for illustration/Ukrinform

Less than half of the funds withdrawn from the budgets of communities to support the Armed Forces of Ukraine were used for the needs of the military. In particular, out of 77.3 billion hryvnias received as personal income tax, only 32 billion hryvnias were spent.

This is stated in the report submitted by the Ministry of Finance to the Association of Cities of Ukraine.

According to the Ministry of Finance, from January to July 2024, the main managers of funds used only 45% of personal income tax revenues. In particular, the Ministry of Strategic Industries received 25 billion hryvnias this year to meet military needs. Of these funds, only 529 million hryvnias were spent — only 2% of the allocated amount.

How to use personal income tax withdrawn from communities. Screenshot from the document of the Ministry of Economy

For the entire year 2024, 65% of the military tax seized from communities was used with similar dynamics: the Ministry of Defense used 100% of the funds, and the State Service for Special Communications and Information Protection did not use a single hryvnia of the allocated 8.7 billion hryvnias.

What about military personal income tax?

As part of the law «On the state budget for 2024», the Cabinet of Ministers planned to direct all revenues from personal income tax of military personnel, 64% of which currently remain in local budgets, to the state budget. The Association of Cities of Ukraine believes that these funds will most likely be dissolved in the state budget, as well as 36% of the current personal income tax, which is administered by the Ministry of Finance. We are talking about 25.8 billion hryvnias this year and 93.7 billion hryvnias next year, Prime Minister Denys Shmyhal clarified earlier.

The Verkhovna Rada of Ukraine may allocate over 517 million hryvnias to the communities of the Mykolaiv region to compensate for the loss of personal income tax from military income.

And on October 6, 2023, it was reported that the Budget Committee of the Verkhovna Rada reviewed the decision on the draft law on personal income tax from the military and made amendments: from October 1 to December 31, 2023, the «military» personal income tax is directed to the state budget in the ratio of 50% to 50%. One part of 13 billion hryvnias will go to the State Service for Special Communications and Information Protection of Ukraine for drones, and the second part, also 13 billion hryvnias, will be directed to the Ministry of Defense for the purchase of artillery systems.

The mayor of Mykolaiv, Oleksandr Sienkevych, said that the city budget lost 3.4 billion hryvnias in revenue due to the removal of the military personal income tax. He added that the city council will reduce the number of employees due to the reduction of the city budget by almost two times. Ernst & Young, in particular, is working on this.

Earlier, the mayor also expressed the hope that the military personal income tax withdrawn from the budget of Mykolaiv will be directed to the manufacture of weapons, in particular, drones for the Armed Forces of Ukraine.

Prior to this, people's deputies commented on the situation with the possible loss of the military personal income tax. In particular, People's Deputy from the «Servant of the People» party Artem Chornomorov criticized the Ministry of Finance and the budget committee of the Verkhovna Rada of Ukraine due to the decision to withdraw the personal income tax paid by the military from the budget of Mykolaiv.

During the session of the Mykolaiv City Council, he stated that he will not support the 2024 state budget unless it is amended to leave the personal income tax paid by military personnel in frontline communities.

People's Deputy of Ukraine Maksym Dyrdin announced that he will not make any amendments to the 2024 state budget for the Mykolaiv region. Unlike his colleague, People's Deputy Oleksandr Pasichnyi said that he is working on making amendments to the state budget for 2024 in order to balance the revenues of the city of Mykolaiv with subsidies after the loss of personal income tax (PIT), which is paid by the military.

People's Deputy of Ukraine Ihor Nehulevskyi said that he supports the removal of the military personal income tax (PIT) from the budgets of communities, because now the priority is the victory of Ukraine, so all other issues, including the everyday needs of communities, should be put on the back burner.