Proposed VAT hike to fund war-risk insurance for business would raise prices, economist Lyamets says

In brief

• Economist Serhiy Lyamets says a proposed rise in Ukraine's base VAT rate from 20% to 21% would fund war-risk insurance for businesses.
• Lyamets argues the main beneficiary would be investor Tomasz Fiala, who has backed the increase.
• He says the cost would be passed on to ordinary Ukrainians through higher prices.

The proposal and Lyamets's objection

Economist Serhiy Lyamets says, the government is considering raising the base VAT rate from 20% to 21% to finance insurance against war risks for businesses (Ціни виростуть на все: влада хоче змусити українців фінансувати компенсацію збитків для бізнесмена-іноземця Фіали, - Лямець – UNIAN). He wrote about it on Facebook, reacting to Tomasz Fiala's support for the one-point increase (Підвищення ПДВ заради страхування бізнесу: експерт заявив про вигоду для інвестиційної групи Томаша Фіали – vesti-ua.net) (Підвищення ПДВ може здорожчати товари для українців - Plandiy – com.ua).

Who would gain

Lyamets argues that state participation in covering war risks would make property insurance cheaper for owners of large asset portfolios (Влада хоче підвищити українцям податки в інтересах крупного бізнесмена Фіали, – Лямець | Українські Новини – ukranews.com). In his view, Fiala is the main beneficiary, since insured property could be revalued at a higher value and used to raise funds for new projects. He says the risks would be insured and the properties would then be worth considerably more.

Who would pay

According to Lyamets, part of the cost of financing the scheme would fall on ordinary Ukrainians through higher prices on goods and services, since VAT is paid by consumers. He calls the mechanism a transfer of business losses to the public.

What is not yet known

The available reports do not specify when the change would take effect, how much revenue the higher rate would generate, or what the insurance scheme's total cost would be. The arguments presented are those of Lyamets, and the reports do not include an official response from the government or from Fiala's side beyond his support for the VAT increase.