Is it necessary to collect personal income tax from military communities?

Already from October 1, 2023 until December 31, 2024, the government proposes to transfer the tax from the salaries of military personnel and policemen to the special fund of the state budget. From there, the funds will be used for the purchase of equipment and the actual production of weapons. The appearance of the corresponding draft law is also connected with the scandalous, non-priority for wartime, expenses of some (some, but not all!) city, village and village councils.

If the bill is passed, local budgets will lose UAH 119.5 billion in revenue over the next 15 months. It is expected that such an idea caused concern in the communities, as well as discussions within the walls of the Verkhovna Rada.

As for communities, the Association of Cities of Ukraine and several city leaders opposed the draft law. Their arguments are that local budgets use significant personal income tax for the needs of the military on the ground, covering their needs faster than it can be done through the center; also, in case of loss of revenues of the military personal income tax, communities will not be able to properly maintain educational and health care institutions, support families of military personnel and IDPs, and provide quality support to their residents.

The communities proposed several alternative solutions that could solve the problem of “improper” spending of funds. In particular, to deduct only a part of the personal income tax of the military to the state budget, and to leave a part to the communities, and to fix the direction of spending of the collected funds (that is, for example, to prohibit spending them on paving stones or similar).

It seems that the government did not hold preliminary consultations with the cities and decided to choose the easiest way to solve the problem, taking away the military completely from the cities of the personal income tax. However, taking into account the arguments and protests of the cities, heated discussions are expected in the Parliament.

It is important that the deputies listen to the communities and come up with a solution that will strengthen the country’s defense capabilities, ensure effective spending of funds, and at the same time not kill the reform of decentralization and community capacity.