The International Monetary Fund (IMF) has voiced a firm position regarding Kyiv's fiscal policy towards the financial sector. In an updated memorandum published in cooperation with Ukrainian authorities, there is a direct recommendation: not to extend the windfall tax on bank profits after 2027. Fund experts believe that maintaining this mechanism will lead to serious distortions in the economy.

The economic trap of temporary measures

The essence of the conflict lies in draft law No. 15262. The document provides for maintaining an inflated profit tax rate for the banking sector at 50% in 2027. The Government of Ukraine has already included the expected revenue from this levy in the Budget Declaration for the period from 2027 to 2029, counting on these funds to fill the treasury.

However, the IMF is categorically opposed to such a strategy. The fund's document emphasizes that after 2027, the windfall tax must be abolished. Its place should be taken by higher-quality and permanent sources of income that will correspond to the government's long-term strategy.

Risks for the banking system

The IMF reminded that by 2027, this mechanism could be applied for the fourth time. Fund experts point to the systemic risks of repeatedly extending such a measure:

  • Entrenchment of economic distortions. Constant uncertainty and high rates change the rules of the game for market participants.
  • Counterproductive behavior. Banks will be forced to make decisions not for the sake of business development, but solely to minimize the tax burden.
  • Capital deficit. High taxation limits the ability of banks to accumulate capital, which is critical for supporting lending and financing post-war reconstruction.

Sector resilience and the future of lending

Despite criticizing fiscal policy, the IMF acknowledges that Ukraine's banking sector demonstrates high resilience. Financial institutions continue to operate effectively despite the war, physical destruction of infrastructure, and regular cyberattacks. High bank profitability, in particular, is supported by operations with the public sector.

Nevertheless, the fund insists: to activate lending and large-scale country reconstruction after the end of hostilities, banks need a sufficient level of capital. Excessive extraction of profits now could undermine the financial sector's ability to perform this function in the future.

History of the issue and other tax plans

Increased taxation of the banking sector became a reaction by the authorities to crisis circumstances. In 2023, banks were required to pay a tax at a rate of 50% retroactively. In 2024, the rate was 25%, but the authorities returned to the idea of an additional levy on the sector's high income.

In June, a draft law was submitted to the Verkhovna Rada fixing the rate at 50% for 2027, which caused concern among international partners.

In addition to issues concerning banks, the updated IMF memorandum contains other important recommendations for reforming Ukraine's economy:

  • Energy and Utilities. The Fund proposes a gradual increase in gas and electricity tariffs for the population, starting from 2027. This should happen only after the creation of an effective system of targeted social support.
  • Taxation of Individual Entrepreneurs (FOP). The introduction of VAT for individual entrepreneurs is planned to be postponed. The corresponding law should come into force in January 2028.