Cabinet expects to increase VAT to finance budget expenditures

The Government of Ukraine, when preparing the state budget for 2027, has provided for the possibility of raising the standard VAT rate by one percentage point — from the current 20% to 21%. Additional revenues are planned to be used, inter alia, to finance business insurance against war risks. However, the adoption of the budget itself will not increase the tax: for that, the Verkhovna Rada will have to separately amend the legislation.

This is stated in the parameters of the draft state budget for 2027 published by the Ministry of Finance.

The draft provides for a resource in the amount of UAH 58.7 billion for business insurance against war risks and other financial support. One of the possible sources of its funding the Ministry of Finance calls the increase of the standard tax rate by one percentage point — from 20% to 21%.

"The final decision on such a measure will require legislative regulation", — the Ministry of Finance emphasizes.

Thus, the VAT rate for now remains at 20%. To increase it, the adoption of a separate law by the Verkhovna Rada with corresponding amendments to the tax legislation is necessary.

Earlier, the increase of VAT was discussed by the government as one of the ways to find additional domestic resources for the budget. Before the approval of the draft budget, there was talk about a possible increase of the standard rate to 21–21.5%. In the final parameters, the government settled on the option of an increase by one percentage point.

Separately, the draft budget provides for another UAH 8.3 billion for the protection of enterprises of the fuel sector against war risks. A possible source of these funds could be an increase in excise taxes on fuel.

The need for additional tax revenues is associated with a sharp increase in state expenditures. The revenues of the 2027 budget are planned by the government at the level of UAH 5.648 trillion, which is UAH 452.1 billion more than the updated plan for 2026. Total expenditures should reach UAH 7.272 trillion — that is UAH 864.9 billion more.

The largest item remains defense and security. It is proposed to allocate UAH 4.885 trillion, or 43.8% of the projected GDP, to them. This is UAH 517.9 billion more than the updated 2026 plan.

In addition, Ukraine next year will need about $52.6 billion of international financial support. The government counts on funds from the European Union, G7 countries within the ERA mechanism, the IMF, the World Bank, the United Kingdom and other partners.

The draft state budget for 2027 has already been submitted by the Cabinet of Ministers to the Verkhovna Rada. During its consideration, the parameters of revenues and expenditures may change. A possible VAT increase should be considered by the parliament as a separate tax decision.

Based on materials: Ministry of Finance of Ukraine, Verkhovna Rada of Ukraine