IMF Recommends Abolishing Bank Windfall Tax After 2027

The International Monetary Fund believes that Ukraine should abandon the windfall tax on banks after 2027 and replace it with more effective fiscal measures. The IMF warns that reapplying such a tax creates distortions and limits banks' ability to build capital for lending and recovery. The IMF's report following the first review of the EFF program indicates that the Budget Declaration for 2027-2029 includes revenues from the windfall tax on banks in 2027, which is linked to a legislative initiative in parliament. The tax rate on bank profits is 50%. The IMF notes that the tax could provide resources for the budget in 2027, but its reapplication reinforces economic distortions and limits banks' ability to accumulate capital. The report emphasizes that after 2027, taxation of unexpected income from banks should be abolished in favor of more effective measures aligned with the agenda of the Ukrainian authorities. It is also reported that the Ukrainian banking sector remains stable and profitable; however, windfall taxes continue to hinder capital accumulation, which is crucial for supporting lending and recovery after the war. On July 20, the IMF Board of Directors completed the first review of the new 48-month EFF program for Ukraine, which opened access to a tranche of about $690 million and increased the total disbursements under the program to $2.2 billion.

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