The Cabinet of Ministers of Ukraine has acknowledged that parliament may lack the votes to raise the current VAT rate from 20% to 21%, prompting the government to explore alternative funding sources to launch the war risks insurance fund. This was stated by Prime Minister Serhii Koretskyi during the 12th Kyiv International Economic Forum, who emphasized that consensus on increasing the tax by 1 percentage point has not yet been reached among large and medium-sized businesses or in the Verkhovna Rada.
No Consensus on VAT Increase
“So far, we have not found support for raising VAT by 1%. There is no consensus among large and medium-sized businesses, and no support in parliament yet. We are looking for other mechanisms,” Koretskyi said. According to him, the government will monitor the budgetary process in parliament, particularly the adoption of the state budget for 2026, and will proceed based on its results. At the same time, the prime minister emphasized that the state has no other way: “we must find the instrument, together we will see what we can contribute from.”
Mechanism for Multiplying International Partners' Contributions
To establish an effective war risks insurance fund capable of covering large business projects, Ukraine must make its own contribution of $1 billion. Only after that, as the prime minister explained, do international partners promise to add another $3 billion to the fund. Koretskyi stressed that the Ukrainian side must take the first step, while partners will merely increase—effectively multiplying—the state's contribution.
Alternative Capital Sources and Launch Timeline
Minister of Economy Oleksandr Kravchenko stated that his ministry, together with the Ministry of Finance, is working on other options for capital sources in the amount of $1 billion. “I wouldn't want to go into specifics, but we are preparing in case there is no VAT [increase],” he said, refusing to detail possible alternatives. The government expects to launch the insurance fund starting in early 2027.
Context: Current State of War Risks Insurance
As RBC-Ukraine notes, war risks insurance currently has limited coverage limits and remains quite expensive: local insurance companies are capable of covering limits of 10–20 million hryvnias, while the participation of international insurance companies allows this amount to be increased. Previously, it was specifically to finance the fund that the government proposed raising VAT by 1%—from 20% to 21%, which requires legislative changes, particularly to the Tax Code; the Cabinet has already included the relevant provision in the draft State Budget for 2027.
Recall that in September 2026, the Cabinet expanded the existing state war risks insurance program covering the needs of small and medium-sized businesses: it was extended to Kyiv and the Kyiv region, and the maximum insurance limit was increased from 3 to 5 million hryvnias. Thus, the search for alternative financing becomes a key condition for scaling the program to big business in 2027.
