Ukrainian lawmakers back use of military taxes to fund arms purchases

KYIV (Reuters) – Ukraine’s parliament approved a law on Wednesday to allow funds raised from income tax paid by military personnel to be used to fund arms purchases and production, the finance ministry said.

The tax, which previously went into local coffers rather than the central budget, would raise about 96 billion hryvnias ($2.7 billion). The funds would be used to buy drones, implement new technology and boost the domestic defence industry, Finance Minister Serhiy Marchenko said.

“We need to create the conditions to turn the course of the military campaign,” Marchenko told a round table discussion on the legislation ahead of the vote.

Ukraine launched a counteroffensive in June to try to recapture territories occupied by Russia but five months into the operation the effort is yet to yield a breakthrough.

Valeriy Zaluzhnyi, Ukraine’s commander-in-chief, said in an interview and opinion piece last week that Ukraine had to innovate as the war with Russia was moving into a phase of static and attritional fighting that benefited Moscow.

Ukraine relies heavily on Western financial and military aid. In recent months the government focused on increasing domestic weapons production and is also scrambling for any additional sources of revenue to channel funds to the army.

Marchenko said the government was spending five billion hryvnias ($138 million) a day to fund its war effort.

Diverting funds from regional budgets could boost Ukraine’s efforts to narrow the gap between its own military capabilities and those of its much larger, nuclear-armed neighbour.

The legislative changes will be confirmed once signed by President Volodymyr Zelenskiy.

(Reporting by Olena Harmash; editing by Tom Balmforth and Christina Fincher)