19 Sep 2023 10:27

NBU expects profit tax hike to 38% for banks to generate over $500 mln in revenue

MOSCOW. Sept 19 (Interfax) - The National Bank of Ukraine (NBU) has proposed to more than double the profit tax for banks to 38% from 18% for 2023-2024, Ukrainian media reported, citing NBU governor Andrei Pyshny.

The NBU forecasts that the tax hike would generate more than UAH20 billion (about $547 million at the current exchange rate) in additional budget revenue, Pyshny said on social media.

The NBU believes the tax increase would have a limited impact on macrofinancial stability while at the same time support Ukraine's defense capabilities. Such a move would not have a significant effect on lending and deposit interest rates given banks' sufficient margins, it reckons.

Financial institutions are fully capable of making the additional payments in the current conditions, Pyshny said, citing monitoring of banks' financial health and an assessment of their stability.

The NBU sees additional taxation of banks as a justified temporary move that has financial and legal grounds, so it is proposing to raise the profit tax rate rather than taxation of net interest income as lawmakers have proposed. Pyshny said the NBU will discuss its proposal soon with the parliamentary Committee on Finance, Taxation and Customs Policy.

He also said that market participants with whom the NBU has spoken understand its position.

Ukraine's 64 operating banks earned combined net profits of UAH83.2 billion in the first seven months of 2023 and paid UAH14.4 billion in profit tax, NBU data showed. Privatbank alone earned UAH34.4 billion and paid UAH7.9 billion and four other state banks earned UAH18.8 billion and paid UAH0.1 billion.

A bill was submitted to Ukraine's parliament at the end of August to tax banks' net interest income at a rate of 5% in 2024-2025 on top of their profit tax, which could generate about UAH10 billion in revenue for the state budget next year alone. Banks' net interest income totaled UAH93.6 billion in the first half of 2023, which was 75% more than in the same period of 2021, before the conflict with Russia.

The official exchange rate was UAH36.57/$1 on September 18.