---
title: "Terekhov proposed cutting VAT on food and medicines from 20% to 5% instead of raising the rate"
description: "Kharkiv mayor Ihor Terekhov proposed cutting VAT on basic food and medicines from 20% to 5% instead of raising the rate, but conditional on controlling retailer markups and protecting individual entrepreneurs (FOP)."
date: 2026-09-18T06:02:15.000Z
lang: en
url: https://xab.info/en/posts/terekhov-proposes-cutting-vat-on-food-and-medicines-to-5-instead-of-raise
tags: [ukraine, vat, tax-policy, poverty, kharkiv, retail]
publisher: "XAB.info"
---

# Terekhov proposed cutting VAT on food and medicines from 20% to 5% instead of raising the rate

![Portrait of Terekhov, who proposed cutting VAT on food and medicines from 20% to 5% instead of raising the rate](https://xab.info/media/2026/09/19/terenov-predlozhil-snizit-nds-na-produkty-do-5/terenov-predlozhil-snizit-nds-na-produkty-do-5-1.webp)

## 🎯 Key Points

- Ihor Terekhov proposed cutting VAT on basic food and medicines from 20% to 5% instead of discussing a rate increase
- In his words, the effect of the cut will only work if retailer markups are capped and strict oversight is ensured
- Terekhov cited a poverty figure of 41.6% versus ~20% at the start of the war and spoke against introducing VAT for FOP
- Meanwhile, the NBU is discussing raising VAT from 20% to 21%, with the revenue directed to a fund insuring business against military risks

Ihor Terekhov, the mayor of Kharkiv and head of the Association of Frontline Communities, made an alternative tax proposal in an interview with RBC-Ukraine: instead of discussing a VAT increase, take the opposite path and sharply lower the rate on socially significant goods. In his words, the tax on basic food items and medicines should be reduced from 20% to 5%, which, according to the mayor's assessment, would produce a multiplier effect and support local producers.

### A proposal instead of a hike

Terekhov's initiative fits within a broader package of demands from the Association of Frontline Communities, which advocates raising minimum wages and pensions and cutting VAT on socially important goods. The mayor of Kharkiv directly linked his idea to the fight against poverty: according to the figures he cited, 41.6% of the population lives below the poverty line, whereas at the start of the war this figure was around 20%. "The resources are there, if there is the will and the need," he stated, emphasizing that budgetary decisions are formally a function of the government, and that the main priority remains military needs.

### Conditions without which the cut will not work

At the same time, Terekhov candidly noted that the tax cut alone does not guarantee lower prices on store shelves. For the effect to reach the consumer, it is necessary to cap markups in retail chains so that retailers do not pocket the difference, and to ensure strict oversight by regulatory bodies — "not corruption, but precisely control," as the mayor put it. He separately addressed the fate of small business: last year, he said, city authorities categorically opposed introducing VAT for individual entrepreneurs (FOP) and halted that proposal, because, in his assessment, FOPs "would simply die out, go underground, and there would be no revenue at all." Without support for business, Terekhov warned, it would first leave frontline cities and communities, and then the movement would continue further west.

### Contradictory data

Here it is important to note the divergence in approaches to tax policy. On the one hand, the official discussion centers on raising the VAT rate: the National Bank has already assessed the impact of such a step on prices and called it moderate, with the rate being raised from 20% to 21%, and the additional revenue proposed to be directed to a fund insuring business against military risks. On the other hand, Terekhov proposes the diametrically opposite move — cutting the rate to 5% on basic goods. Thus, in the public sphere, two versions incompatible in direction coexist: raising the rate to replenish a protective fund, and sharply lowering it to support the population and local producers. The specific figures (21% versus 5%) and the intended use of the revenue in these two scenarios differ, and the final decision rests with the government.

### Context: what the government and the NBU are doing

In parallel with the debate over the VAT rate, authorities are expanding the existing program of business insurance against military risks: Kyiv and the Kyiv region have been included in the high-risk territories, and the maximum compensation of the insurance premium has been raised from 3 to 5 million hryvnia per year for a single enterprise. It is precisely this mechanism, by the design of the VAT-hike proponents, that is supposed to be replenished from the additional revenue. Thus, Terekhov's proposal to cut the rate to 5% effectively calls into question the funding source of this program and shifts the emphasis from protecting business against military risks to directly supporting consumer prices and poor households.

## 🔍 Fact-Check Verification

- [VAT on basic goods should be cut, not raised, - Terekhov](https://www.rbc.ua/ukr/news/pdv-20-5-terehov-zaproponuvav-radikalne-rishennya-1789711109.html) - Первичное интервью: снижение НДС с 20% до 5% на базовые продукты и лекарства, условие контроля наценок, позиция по ФОП, цифра бедности 41,6%.
- [In the Rada, a proposal to cut VAT on food, medicines, and children's goods](https://delo.ua/ru/news/v-rade-predlagayut-snizit-nds-na-produkty-lekarstva-i-detskie-tovary-472517/) - Контекстная инициатива в Раде о снижении НДС на продукты, лекарства и детские товары; не смешивать с личным предложением Терехова.
- [Cutting VAT on food, raising pensions and wages: Terekhov proposed how to fight poverty](https://www.obozrevatel.com/ekonomika-glavnaya/snizhenie-nds-na-produktyi-rost-pensij-i-zarplat-terehov-predlozhil-kak-borotsya-s-bednostyu.htm) - Подтверждает пакет предложений Ассоциации прифронтовых общин: снижение НДС, рост зарплат и пенсий, борьба с бедностью.
- [Terekhov: Cutting VAT on food is an important step in the fight against poverty](https://focus.ua/ukraine/764943-terehov-snizhenie-nds-na-produkty-pitaniya-vazhnyy-shag-v-borbe-s-bednostyu) - Подтверждает тезис о снижении НДС на продукты как шаге в борьбе с бедностью.

## ❓ FAQ

### Q: What exactly did Ihor Terekhov propose regarding VAT?
**A:** He proposed cutting VAT on basic food items and medicines from 20% to 5% instead of discussing a rate increase, in order to create a multiplier effect and support local producers.

### Q: Will the VAT cut automatically affect prices?
**A:** No. According to Terekhov, this requires capping markups in retail chains and ensuring strict oversight by regulatory bodies so that retailers do not pocket the difference.

### Q: What alternative position is being discussed at the NBU and in the government?
**A:** The NBU is discussing raising the VAT rate from 20% to 21%, with the additional revenue directed to a fund insuring business against military risks; the government, meanwhile, expanded the insurance program and raised the maximum premium compensation from 3 to 5 million hryvnia per year.