Ukraine fails to pass key vote on parcels tax ahead of IMF's visit to Kyiv

Ukraine's parliament failed on Tuesday to pass legislation raising taxes on parcels sent to the country, a key condition to unlock billions in funding, as the International Monetary Fund's mission was due to arrive in Kyiv for its first loan review.

Currently, parcels containing goods worth less than ​150 euros ($175.54) are not subject to taxes in Ukraine. Introducing the tax would generate around 10 billion hryvnias ($227.53 ‌million) ⁠annually, the finance ministry said.

However, the issue has turned out to be a sensitive one for Ukraine as some parliamentarians fear it will further raise the cost of living for people already battered by more than four years of war. Others argue that it will help domestic producers by helping reduce consumer imports.

The IMF's monitoring mission is expected in Kyiv on Wednesday for its first review of an $8.1 billion lending program to Ukraine, approved in February.

Opposition lawmaker Yaroslav Zhelezniak said that parliament had failed to get enough votes to pass the required amendments on foreign parcels. It was not immediately clear whether lawmakers plan to return to the issue this week.

The IMF requires Ukraine to expand its domestic revenue base as the country faces a ballooning budget deficit due to growing defence spending as the war grinds on.

Ukraine currently channels the bulk of its domestic revenues to defence and relies on foreign financial aid to be able to meet its social and humanitarian spending.

The IMF's program remaining on track is also a prerequisite for progressively unlocking a 90 billion euro, two-year, support package for Ukraine from the European Union.

Ukraine has struggled to move forward with several key laws and reforms aimed at expanding ​its tax base, including another to introduce ⁠value-added tax for self-employed individuals.

-Olena Harmash, Yuliia Dysa/Reuters