EU ties part of Ukraine $134 billion aid to unpopular tax measure

BRUSSELS – The European Union will tie some payouts from the €90 billion (S$134.12 billion) aid package for Ukraine to an unpopular tax change already demanded by the International Monetary Fund, people familiar with the matter said.

The tax requirement will apply to the so-called macro-financial portion of the loan worth €8.4 billion, they said.

EU member states on May 18 agreed to the conditions for the macro-financial assistance programme, Economy Commissioner Valdis Dombrovskis said in a post on X. 

To receive those funds, Kyiv will have to adopt legislation to expand the share of foreign parcels subject to a 20 per cent value-added tax, according to the people.

Ukraine is set to receive the first payout in June followed by the second scheduled for September and the third by the end of the year once the reforms are done, they said.

The requirement mirrors the condition that the IMF has put in place for the release of another, US$700 million (S$895.54 million) tranche of its aid programme, the people said.

The European Commission, the EU’s executive, is coordinating some of its conditions for financial assistance to Ukraine with those of the Washington-based lender.

“The programme will strengthen Ukraine’s economic and financial resilience, while supporting reform and anti-corruption efforts,” Mr Dombrovskis said in the post.

The tax amendment has proved highly unpopular among Ukrainians, raising significant doubts about whether Parliament will approve it.

One opposition lawmaker, Mr Yaroslav Zheleznyak, told Bloomberg that he doesn’t see enough support to pass the measure, which would require at least 226 of 392 available votes.

His view aligns with concerns expressed by one of the people who spoke on condition of anonymity.

Ukraine’s Finance Ministry spokesman Dmytro Gerasymenya told Bloomberg that the government continues to work on finalising the EU loan agreement and its conditions before it is ratified by Parliament. 

The spokespeople for the commission and the IMF had no immediate comment.

Ukrainians strongly oppose measures that would increase their tax burden, even if the additional revenue is needed to finance the military.

They are also among the requirements on the path to joining the EU, one of the key strategic goals for the former Soviet nation.

Ukraine, now in the fifth year of its war against Russian invasion, relies heavily on foreign funding and its needs continue to grow.

The Defence Ministry, for instance, is planning a significant pay increase for infantry soldiers, something that wasn’t factored into the 2026 budget.

The IMF and the EU have already agreed to delay by a year another sensitive tax change, one that would expand the range of Ukrainian entrepreneurs subject to VAT, the people said.

The Washington-based lender is set to review its aid package in late May.

It could still postpone the requirement to change the parcel tax, offering further relief to the government, a person familiar with the matter said. BLOOMBERG