US urges Ukraine to tackle ‘gray markets’ to boost state revenue before raising taxes
The US Special Representative for Ukraine's Economic Recovery advised Ukraine to target unofficial markets in tobacco, alcohol, and electronics, potentially unlocking substantial untapped revenues before considering tax hikes.
The United States is encouraging Ukraine to focus on customs reform and addressing “gray markets” as primary methods to increase state revenue, rather than raising taxes, according to Penny Pritzker, the US Special Representative for Ukraine’s Economic Recovery.
These recommendations come as Ukraine approved draft legislation to modify the 2024 state budget. The legislation proposes increasing expenditures by 500 billion hryvnias ($12 billion) and amending the Tax Code to generate an additional 140 billion hryvnias ($3,4 billion).
While acknowledging that revenue decisions ultimately rest with Ukrainian officials, Pritzker emphasized the potential of untapped income sources, according to Ukrinform.
“You have revenues that you’re not receiving and that you should be receiving today. Let’s focus on that first,” she stated on a briefing in Kyiv, according to Ukrinform.
The Special Representative highlighted two key areas for improvement. First, she proposed digitizing customs processes to enhance efficiency and reduce corruption risks.
Second, Pritzker pointed to significant revenue potential in regulating gray markets, particularly in sectors such as tobacco, alcohol, and electronics.
The US advice suggests that Ukraine could potentially meet its increased budgetary needs without resorting to tax hikes by instead focusing on improving existing revenue collection mechanisms and addressing unofficial economic activities.
US aid to Ukraine
On 29 July, the Ukrainian Prime Minister met with Penny Pritzker in Kyiv to discuss crucial economic support and recovery initiatives.
He announced that Ukraine is set to receive $7.85 billion in US aid, with the first tranche of $3.9 billion expected in the coming weeks.
Related:
- Ukraine to receive $ 7.85 billion in US aid, first tranche expected in coming weeks
- Ukraine, Germany sign declaration to strengthen bilateral cooperation for Ukraine’s post-war recovery
- Ukraine’s government excludes top restoration official from annual recovery conference, he resigns
- World Bank: Ukraine’s recovery costs rise to $486 billion
