Ukraine Cabinet to submit tax reform jointly with 2016 budget

Ukraine’s Cabinet of Ministers will submit the 2016 budget to parliament jointly with a tax reform plan and other structural reforms for the sake of balancing fiscal accounts, Finance Minister Natalie Jaresko said on Nov. 13, according to the Interfax news agency. “The Cabinet over the upcoming weeks plans on submitting to parliament a package of legislation that will allow for approving the 2016 budget based on new tax rules and will simultaneously secure spending cuts due to structural reforms,” Jaresko said during a press briefing with Prime Minister Arseniy Yatseniuk and U.S. Treasury Secretary Jacob Lew.

A balanced budget and implementation of other reforms under the IMF program will secure USD 4 bln – including a third wire of USD 1.7 bln under the current External Funds Facility program and U.S. credit guarantees (USD 1 bln) – in what should significantly increase gross international reserves from the current USD 13 bln, Jaresko said.

Alexander Paraschiy: We are monitoring for what type of tax reforms will be adopted and when. Given the tax talks have only started and more than 100 MPs support alternative tax reform, communication about new tax changes as well as approval of the 2016 spending plan might be delayed. Only if the 2016 budget is approved by the end of November (a very optimistic scenario), the IMF executive board might have enough time for the approval of a third tranche by the year end. Therefore, we expect Jaresko’s announced gross international reserves increase from the current USD 13 bln will happen only in early 2016.