Військовий збір: уроки історії та зарубіжні моделі залучення ресурсів

Ukrainian MP on the necessity of increasing the military levy

Ukraine enjoys strong international backing, yet relying solely on external funding is a flawed long-term strategy. “Ask not what your country can do for you, ask what you can do for your country” – the words of the 35th US President John F. Kennedy are more relevant today than ever before.

On October 10, 2024, the Verkhovna Rada of Ukraine adopted in the second reading the draft law No. 11416-d, which increases the military levy from 1.5% to 5%. This decision became a necessary step in mobilizing resources to finance Ukraine’s defense capabilities amidst Russian aggression.

Security demands colossal resources, including financial ones. In particular, defense and security expenditures last year amounted to 40.5% of GDP, which is 1.7 times more than in 2022. Our country has entered the top ten countries globally in terms of military spending, and ranks first in terms of its ratio to GDP.

According to the calculations of the Cabinet of Ministers of Ukraine, the tax changes are expected to bring an additional UAH 58 billion to the budget this year, and UAH 137 billion next year. At the same time, the Government reminds that financing each soldier costs the budget UAH 1.2 million, and there is a shortfall of at least UAH 500 billion for military expenditures this year alone.

Ukraine is not the only nation in world history forced to revise its tax policy during wartime. Defense spending is not a short-term phenomenon, and to avoid complete budget depletion, tax mechanisms that ensure uninterrupted army financing are essential.

The history of income tax in the USA demonstrates the evolution of financing military efforts. The first income tax was introduced to finance the Civil War. To cover the costs of World War I, the maximum tax rate in the USA increased from 7% to 77%, and in Great Britain, between 1905 and 1919, taxes and fees cumulatively increased 17 times.

During World War II, governments of many countries had to drastically increase taxes. The USA, which spent over $321 billion, received a significant portion of its funding—almost 50%—from taxes, and the excess profits tax rate at that time reached 90%. In 1942, a 5% “victory tax” was introduced on individual incomes exceeding $624 per person. This tax became an important tool in financing the army, similar to the current military levy in Ukraine. The Victory Tax was abolished in 1944, having played a crucial role in maintaining national security. The participation in the Korean War of 1950-53 was financed by the USA solely through taxes and expenditure cuts.

Today, Israel is one of the world leaders in military innovation. However, at the turn of the 1970s and 1980s, military expenditures reached 25-30% of GDP, and there was a crisis that in its nature could resemble the current situation in Ukraine. In response to the threat to national security caused by the Six-Day War in 1967, the country introduced a military levy amounting to 8.33% of citizens’ incomes and 2% of companies’ profits. Israel, choosing a course towards strengthening the redistributive function of taxation, continues to raise taxes for additional military expenditures due to escalations, such as the war in Gaza.

Military levies and taxes during armed conflicts have been introduced in many countries. For instance, in Colombia and Sri Lanka, the military tax rate is 4%, and in Bosnia and Herzegovina, Croatia, and Cyprus, it is 3%.

Taxes are used as a tool for state financing not only in connection with military actions but also due to natural disasters. In 2013, after the Great East Japan Earthquake, Japan introduced an additional tax of 2.1% on the incomes of all citizens and businesses, effective until 2037, with the aim of restoring nearly half a million homes, infrastructure, and supporting small businesses.

The so-called earthquake tax (also known as the special communication tax) was introduced in Turkey after the earthquake in the city of Izmit in 1999, which claimed over 17,000 lives. At that time, taxes on income, vehicles, real estate, communication, and private transactions were increased. In 2003, most of these taxes were abolished, but the communication tax remained and became permanent. Furthermore, this year, due to “complex geographical circumstances,” the Turkish parliament began considering the possibility of introducing a tax to support its defense industry.

The military levy is a contribution of every citizen to the defense of their country. History confirms that taxes are an integral part of a victory strategy. Only through the mobilization of internal resources can economic stability and defense capability be ensured.

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Olena Moshenets