By Kateryna Mykhailova

Copyright kyivpost

Ukraine’s lawmakers have proposed raising the corporate tax on bank profits to 50% in 2026 to fund growing state budget needs amid the ongoing full-scale war.

The proposal also prevents banks from offsetting losses from previous years, Danylo Hetmantsev, a deputy from President Volodymyr Zelensky’s Servant of the People party, reported on his Telegram.

This exceptional measure will allow the state budget to receive an additional Hr.30 billion ($728.5 million) in 2026, “a critically important resource for the country under martial law,” Hetmantsev wrote.

During 2023-2024, the state increased the tax on bank profits to 50%. This year, the Verkhovna Rada, Ukraine’s parliament, eased conditions, allowing banks to pay a standard 25% rate in windfall tax to the state budget.

Ukrainian financial authorities, including the National Bank of Ukraine (NBU), had previously opposed the move, saying that applying a 50% tax for a second time creates “far more drawbacks than benefits” for the economy.

“In 2023, we supported a one-time taxation of the banking system’s profits at a 50% rate and the application of an increased 25% rate for subsequent periods. We also helped clarify this decision,” Deputy NBU Governor Sergiy Nikolaychuk told Interfax-Ukraine in an interview.

“However, last year, the story of retrospectively applying a 50% tax rate repeated. In the long term, such a policy has far more drawbacks than benefits,” Nikolaychuk said.

On Sept 15, Ukraine’s government, the Cabinet of Ministers, approved the draft State Budget for 2026, marking the end of the first stage of the 2026 budget review. Now, the parliament is reviewing the draft and proposing amendments.

Hetmantsev submitted a draft law proposing a temporary 50% corporate profit tax rate for banks in 2026, which needs to pass several stages in parliament before it can take effect.

“The war continues. Each year, the security and defense sector requires increasing expenditures. Already now, preparations for the 2026 state budget push us to make tough decisions,” Hetmantsev wrote.

Banks are now reporting record profits, largely from low-risk government securities rather than business loans or innovation, Hetmantsev wrote on Telegram. “Given this structural liquidity surplus and guaranteed income from government bonds, it is natural for the state to channel part of these profits to support the army,” he said.

In 2024, the International Monetary Fund (IMF) also recommended against imposing a 50% windfall tax on the banks for the second time.

Imposing a 50% tax on bank profits for a second consecutive year contradicts the nature and intent of windfall taxes, undermines trust in policy, and is not an effective financial solution, Trevor Lessard, the Deputy Head of the International Monetary Fund (IMF) Mission in Ukraine, told Interfax-Ukraine.

Following the IMF statement, both the National Bank of Ukraine and the Finance Ministry spoke out against the proposal, citing the Fund’s concerns, Ukrainian lawmaker Yaroslav Zheleznyak reported on Telegram in September 2024.