Against the backdrop of a delay in the release of additional assistance from the United States, Ukraine increasingly began to talk about the importance of finding internal resources that would allow stable financing of the defense and security sector, despite any internal political processes in partner countries.
It must be admitted that for war the issue of money is as important as the issue of social justice. A new mobilization of thousands of Ukrainians will require significant resources for weapons and ammunition, and if funds are not found for this, it is most likely that this will not only not solve the problems, but, on the contrary, will exacerbate them.
According to Prime Minister Denis Shmygal, in order to support one soldier at the front, eight people are needed in the rear who work and pay taxes. Therefore, the government team is now looking for mechanisms to stabilize the economy and raise a significant amount of funds. One of these ways to fill the Ukrainian budget is considered to be economic reservation from mobilization.
What options for economic “armor” are being considered?
Ideas for introducing economic “armor” have already been heard from representatives of the Cabinet of Ministers, the Office of the President and even individual members of parliament. They are mainly based on the fact that enterprises are able to book their workers in exchange for a certain amount of taxes paid to the budget.
“The average salary, salary level, level of tax payment by both an individual and a company - all these things are being considered comprehensively today. And the impact of an enterprise or industry on the economy - this is the framework of the future reservation system that we are working on,” Prime Minister Denis Shmygal said in early March.
According to him, in order to receive a “reservation” the amount of taxes and the official salary must be average or above the industry average.
“Economy-critical enterprises will retain priority in bookings, but additional opportunities will be given to enterprises that fill the state budget... For example, the tax burden is higher than the industry average. We are looking and working on how to introduce these things into legislation,” explained the head of the Cabinet of Ministers.
Subsequently, MP Alexey Goncharenko spoke in more detail about Shmygal’s initiative. According to him, reservation from mobilization can be received by those liable for military service who have a salary of 35 thousand hryvnia per month or pay Personal Income Tax (PIT) in the amount of 6.3 thousand hryvnia and the Unified Social Contribution (USC) from 7 .7 thousand hryvnia. As for IT workers, they can also be booked, but for this you need to be a resident of “Diya Siti” and pay personal income tax from 6.3 thousand hryvnia.
A somewhat similar reservation model is proposed by the Deputy Head of the Presidential Office, Rostislav Shurma. Reservation from mobilization can be received by a person liable for military service who has a salary of 30-35 thousand hryvnia and on which all taxes are paid.
“Both business and society need to be given some kind of fair and understandable mechanism to guarantee their work. So that we do not mobilize only those who really work “in white”, and therefore they are visible. And so that everyone understands that now is the time: either you work for the budget, and so support the army, or you serve in the army, there is no third option. Now there is a certain calculation of how much it costs to train, armament and pay for one mobilized person. If we take the average amount of expenses at all stages, then this is about 80 thousand hryvnia per fighter per month. Therefore, in the rear, 4-5 people must work every day to provide this money to the budget,” commented Rostislav Shurma.
At the same time, the Chairman of the Verkhovna Rada Committee on Economic Development, Dmitry Natalukha, is promoting a bill that will stipulate that employers will be able to pay a separate military tax in the amount of 20 thousand hryvnia for their employee liable for military service, so that he will not be mobilized.
“On the one hand, 20 thousand hryvnia is the average salary in the country, according to the State Statistics Service. On the other hand, job sites list an average salary of 19 thousand hryvnia. The minimum allowance for a serviceman who does not carry out combat orders is UAH 20,100. Therefore, these three figures give an average of 20 thousand. This is a military training camp,” says Natalukha.
This bill is still being discussed, and it could be submitted to the Verkhovna Rada in April.
Economics or social justice
In a commentary to RegioNews, Oleg Getman, coordinator of the expert group of the economic expert platform, member of the supervisory board of the Ukrainian Business Council, noted that business circles support the introduction of the so-called economic reservation.
“Now strategic enterprises can reserve the mobilization of their workers with any salaries. But business believes that in addition to this norm, some other mechanism should be developed for the reservation of certain categories of people liable for military service, and in parallel, this will additionally fill the state budget. There are even estimates that if, for example, enterprises introduce 20 thousand hryvnia per month for each of their employees liable for military service, this will bring an additional 200 billion hryvnia per year. This amount would be very appropriate for the needs of the army,” says Oleg Getman.
When asked whether there are many companies in Ukraine that can pay 20 thousand hryvnia for their employee or set his salary at 30-35 thousand hryvnia, the expert claims that there are indeed enough such enterprises.
“Now a huge part of salaries is paid in envelopes. If we take into account that the average salary in Ukraine is about 16 thousand hryvnia, then in fact another 30-40% needs to be added to these salaries, and then they will be truly real. About 300-400 billion hryvnia are paid using “envelopes”: either the minimum wage plus an “envelope”, or the entire “envelope”. Therefore, this economic reservation will stimulate most enterprises to bring their “envelopes” out of the shadows. This is the most important effect that we can see from this initiative,” says Getman.
At the same time, military expert Oleg Zhdanov negatively evaluates the idea of introducing “reservation” for taxes and sees certain public risks in this.
“In fact, those who can pay have remained undrafted into the army. Most people with lower incomes are already at the front. In any case, such economic reservation will create social inequality, which may cause significant social resistance from society. In peacetime, one could still talk about an actual official payoff from serving in the army, but in wartime, when the Constitution states that the duty of a citizen is to protect the state, in fact, an official payoff is a very bad phenomenon,” Zhdanov noted.
