State Budget 2024: assessment of tax revenues and consequences for taxpayers

In 2024 you will have to pay more taxes. Everyone without exception. And although formally tax rates will remain unchanged, replenishment of the state budget will be ensured through the fight against evasion and through a hidden increase in the fiscal burden.

The draft state budget for 2024, which is posted on the official website of parliament, indicates that tax revenues will amount to at least UAH 1.54 trillion. The growth in revenue, which will be generated through taxes, will be almost 29% compared to 2023.

However, the money from taxes is still not enough to cover the budget deficit. Despite the fact that the deficit in 2024 will be reduced to 20.4% of GDP against the expected 26% of GDP in 2023. Therefore, Ukraine intends to attract about $43 billion abroad, mainly in the form of loans and grants from partners. And in total, external borrowings in 2024 will amount to 100% of total revenues.

But increased fiscal pressure is inevitable. So, taxpayers should keep their pockets wider.

How much will taxes bring to the state budget in 2024?

The draft state budget 2024 is calculated based on total revenues in the amount of UAH 1.75 trillion. Traditionally, most of this revenue would come from taxes. Their share of income will be about 88%. In state budget revenues for 2023, the share of tax revenues is at 86%. That is, by 2 p.p. less.

In other words, in 2024, when generating state budget revenues, the emphasis on tax payments will become even stronger. The share of non-tax revenues, of which the bulk is generated by income from property and business activities, and administrative fees, on the contrary, will decrease.

Domestic taxes on goods and services will bring the most to the state treasury – UAH 949 billion or 62%. These include, first of all, excise taxes on products manufactured in Ukraine and VAT.

The personal income tax (personal income tax or personal income tax), together with the corporate income tax, should provide revenues in the amount of UAH 487 billion or 32% in 2024.

The least amount will go to the budget from taxes on international trade - UAH 46 billion or 3%. These are mainly payments from import duties.

What will be the amounts of revenue for different types of taxes?

There will be an increase in almost all major taxes, and quite a significant one. If we analyze the plan for 2024 and compare it with the figures included in the state budget for 2023 (as amended on July 21, 2023), then the largest increase is expected for the following taxes:

1. Personal income tax – by 74% to UAH 313 billion;
2. corporate income tax – by 57% to UAH 174 billion;
3. excise tax on goods produced in Ukraine – by 54% to UAH 99 billion;
4. VAT on goods produced in Ukraine/services provided (including budgetary reimbursement) – by 31% to UAH 298 billion;
5. import duty – by 26% to UAH 44 billion;
6. excise tax on products imported into Ukraine – by 21% to UAH 97 billion;
7. VAT on imported goods – by 15% to UAH 456 billion.

At the same time, there will be a decline in certain items. For example, revenues from rent and fees for the use of other natural resources will drop by more than 43% to UAH 55 billion.

The amount of excise tax on cars imported to Ukraine will be reduced by 21% to UAH 10 billion.

And revenues from export duties in 2024 will decrease by almost one and a half times to UAH 975 million.

How will the tax increase be ensured?

Based on the above figures, the following picture emerges. The Cabinet of Ministers, and the Ministry of Finance in particular, together with the deputies, clearly have high hopes for the de-shading of the population’s income and the fight against “salaries in envelopes.” At least, the increase in income tax amounts by more than 1.7 times indicates exactly this.

In addition, the authorities seem to believe in the restoration of Ukrainian business. After all, the amount of corporate income tax will not only return to the pre-war level, but will also exceed by 19% the figure that appeared in the state budget for 2021. Although, of course, strengthening control by the State Tax Service (STS) will play an important role in increasing revenues from companies and enterprises.

Deputies are also counting on the effect of the increase in fuel taxes, which occurred on July 1, 2023. For example, revenues from the excise tax on imported fuel in 2024 will increase by 41%, and revenues from the excise tax on fuel produced in Ukraine will increase 17 times!

The increase in VAT payments, which is expected to total more than 20% in 2024, is associated both with the already mentioned increase in fuel taxes and with an increase in import volumes (according to the IMF forecast, this growth in 2024 by 2023 will be 17%) , as well as with the recovery of domestic consumption.

As for the fall in rental payments, this is a direct consequence of the decline of the mining industry. In 2022, the volume of industrial output as a whole decreased by 37%. At the same time, metal ore production fell by 62%, oil and gas production - by 8.4%, coal production - by 8%. It looks like the situation is clearly not going to improve. Neither in 2023 nor in 2024.

What taxpayers should prepare for

An increase in the tax revenue plan indirectly indicates that the State Tax Service will be more active in combating draft evaders. Deputies assure that an increase in tax rates is not yet expected. Accordingly, reserves for replenishing the budget should be sought among those who avoid paying taxes and are engaged in optimization.

In principle, tax officials have a free hand for this. The moratorium on inspections has been de facto abolished since August 1. And from October 1, penalties for businesses for violations related to the use of PPO will be returned.

In addition, as part of the agreements with the IMF, Ukraine has committed to adopt a National Revenue Strategy by the end of 2023. One of the points of this strategy should be an algorithm that will eliminate abuses involving individual entrepreneurs.

According to information from the Tax Committee of the Verkhovna Rada, which Delo has at its disposal, no changes to the simplified system are expected yet. But no one is stopping the tax authorities, within the framework of the current legislation, from intensifying the fight against “salary individual entrepreneurs”, which allow employer companies to minimize the tax burden on the payroll fund.

However, hidden tax increases will still occur. It will be a consequence of an increase in the minimum wage from January 1, 2024 by 6% to UAH 7.1 thousand per month. It is also planned to increase the cost of living by 13% to UAH 2,920. This will entail an increase in the tax burden for single tax payers of groups 1 and 2, and for all entrepreneurs and companies that pay a single social contribution.