Head of the National Bank of Ukraine Andrii Pyshnyi stated at a briefing that the likely increase in the VAT rate, which is being discussed in the context of forming a fund to support business during wartime, will have a moderate impact on the overall price growth in the country. According to him, an analysis of the potential rate change shows a limited inflationary effect, which should not be viewed in isolation.
NBU's Assessment: Moderate Effect and Dual Logic
"It is important to assess it not only from the perspective of the higher VAT's contribution to inflation, but also from the angle of reducing business costs, supporting investment and economic activity through the ability to insure against wartime risks, which, conversely, should help contain price growth," Pyshnyi emphasized. Thus, the regulator underscores that raising the rate is not only a direct inflationary channel but also a tool that, by lowering costs and insuring risks, can work in the opposite, restraining direction.
Business Support Fund and Insurance Against Wartime Risks
The Cabinet of Ministers is developing a mechanism to insure businesses that suffer losses from Russian strikes. To implement this initiative, a separate special fund is planned, the financing of which is expected to be partially covered through a review of tax parameters. In parallel, the Cabinet is preparing amendments to the state business support program during wartime: it is to be extended to enterprises whose property is located in Kyiv and the Kyiv region.
The 2027 Budget and the Role of the Verkhovna Rada
The draft state budget for 2027 already includes an increase in VAT from 20 to 21%. At the same time, the NBU and government sources emphasize that an actual rate increase will require additional legislative action by the Verkhovna Rada. In other words, the figure built into the budget is not yet an automatically effective rate — its entry into force depends on a parliamentary decision.
Contradictory Data
There are two competing logics in assessing the impact of a VAT increase on prices. On the one hand, any increase in the tax rate is traditionally viewed as a direct inflationary factor that may be passed on to the final prices of goods and services. On the other hand, NBU head Andrii Pyshnyi insists that the effect will be moderate, and that, taken together with the creation of a fund to insure wartime risks and the reduction of business costs, the increase may, conversely, help contain price growth. The difference in interpretations stems from the fact that the first view captures only the tax channel, while the second takes into account the indirect macroeconomic effects of supporting business activity. Until a parliamentary decision is made, the rate exerts no actual influence on consumer prices.
Context: What This Means for the Economy
The package of measures — embedding a higher rate in the 2027 budget, preparing a business insurance mechanism, and extending the support program to Kyiv and the Kyiv region — points to the state's attempt to balance the fiscal needs of wartime with the protection of business activity. The key condition remains the legislative enshrinement of the new rate: without a decision by the Verkhovna Rada, the increase from 20 to 21% will remain merely a budgetary hypothesis rather than an effective tax parameter.
