Ukraine's PM links VAT hike to fund insuring businesses against war damage

Ukrainian Prime Minister Serhiy Korechyk said in an interview with the program "TSN.Tyzhden" that the government's proposed one-percentage-point increase in value-added tax, included in the draft 2027 state budget, is tied to the need to fund a new insurance mechanism for businesses damaged by Russian attacks.

Daily strikes hit the economy

According to Korechyk, daily Russian missile and drone strikes are destroying Ukrainian enterprises, dealing a direct blow to the economy, the budget and the state's overall resilience. As a result, the government has moved to create a dedicated fund to quickly compensate businesses for losses caused by these attacks.

To launch the mechanism, Ukraine must make an initial contribution of roughly $1 billion. Since no other funding source is available, the government built the VAT increase into the 2027 budget draft.

"The state budget includes some unpopular decisions – including a small tax increase, VAT. Unfortunately, there are no other sources," Korechyk said.

A signal to allies

The prime minister explained that the move is also meant to show allies that Ukraine is willing to invest in defending its own economy on its own. The government expects international partners to eventually quadruple their contribution to the fund.

"I believe it's the partnership way, when a state, when a government, contributes its share and shows that despite everything, we keep fighting," he said.

According to the prime minister, a total fund of $5 billion would allow insurance companies to offer Ukrainian businesses policies at affordable prices without needing to reinsure abroad. He stressed that classic war-risk insurance currently does not work well because of its high cost and lengthy payout process, while the new mechanism would ensure businesses receive funds immediately after rescuers verify the damage.