Ukraine needs to approve parcel tax to keep IMF funding, source says

Ukraine needs ‌to ​adopt a law introducing a value-added tax on inexpensive parcels from abroad to ensure its $8.1 billion programme with the International Monetary Fund - due for review in June - remains on track, ‌a source close to discussions said.

Ukraine needs ‌to ​adopt a law introducing a value-added tax on inexpensive parcels from abroad to ensure its $8.1 billion programme with the International Monetary Fund - due for review in June - remains on track, ‌a source close to discussions said. Kyiv depends on international aid to cover its budgetary needs and fund a war with Russia. Most of the multi-year funding programmes are conditional on Ukraine proceeding with governance reforms and changes to its fiscal legislation.

The new IMF programme, ‌approved in February, provides credibility for allies to proceed with their funding. It is due for a review in June to ‌determine whether Ukraine is meeting its targets. The fund is pressing Ukraine to expand its fiscal base. "Parcels have now become one of the key issues," the source said. "Without adopting this law, there may be no review, with all the negative consequences that would entail."

If the IMF programme goes off ⁠track, Ukraine ​will not be able to receive ⁠money from the European Commission, the source added. Currently, parcels containing goods worth less than 150 euros ($175.54) are not subject to VAT in Ukraine. Introducing the tax would ⁠generate around 10 billion hryvnias ($227.53 million) annually, the finance ministry said.

A draft law was submitted to parliament but was not debated due to ​a lack of support among legislators. The ministry said the proposal will not make it harder for Ukrainians to send ⁠and receive parcels from abroad.

Non-commercial parcels worth less than 45 euros will not be taxed, it added. The VAT will not be rolled out before ⁠2027. Parliament ​recently balked at adopting several laws critical for much-needed international funding, including a proposal to introduce VAT for self-employed individuals - one of the benchmarks set by the IMF.

Many lawmakers said they would not support the unpopular measure. This forced the government ⁠to return to negotiations with the IMF. Following talks with IMF officials in Washington in mid-April, Prime Minister Yulia Svyrydenko said there ⁠was an agreement that the introduction ⁠of the tax was "not constructive." Ukraine will seek alternatives, she added.

"The issue ... is difficult to adopt in 2026 and may be postponed to a later date," the source said, adding that ‌talks on the matter ‌are ongoing. ($1 = 0.8547 euros) ($1 = 43.9507 hryvnias)