IMF program struggles to get off the ground

UKRAINE - In Brief 07 Feb 2026 by Dmytro Boyarchuk

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Bloomberg wrote about the issues surrounding the new IMF program. The picture presented by the journalist only needs a few additional details. The Ministry of Finance developed a proposal that was very poorly analyzed. The key issue is that tax compliance costs in Ukraine under the general tax system are extremely high, and becoming a VAT payer under this system immediately means paying more bribes (on top of paying for additional accounting services). Naturally, small and micro-entrepreneurs are reluctant to face all the 'charms' of general tax administration and VAT registration. Someone ‘clever’ in the Ministry of Finance sold the ‘brilliant idea’ of lowering the VAT threshold to the IMF and included it as a prior action for the new IMF program. This was a serious disservice to everyone, because this ‘minor point’ has put all IMF financing at risk due to the need to implement this step. It is no surprise that Ukrainians reacted furiously to this proposal, as turning hundreds of thousands of micro-entrepreneurs into VAT payers would ruin the majority of small family businesses (or they simply switch to shadow). The Bloomberg journalist wrote that the simplified tax regime is abused for tax evasion. That is true, but only for up to 15% of entrepreneurs using the simplified regime. Moreover, this problem is more about the inability of law enforcement bodies to identify and prosecute tax evasion cases (certainly not for free) than about the simplified tax regime itself. In other words, when everyone—including the Prime Minister and the President—realized what the Ministry of Finance had done by including this prior action, it became a real issue. Even from a common-sens...