Tax Trap: Bill No. 15262, Approved at First Reading, Could Slow Down Lending to the Economy

On 27 October, the Verkhovna Rada passed Bill No. 15262 at first reading. The bill provides for extending the increased 50% corporate income tax rate for banks through 2027. However, the short-term budgetary benefit could come at the cost of a significant reduction in banks' lending capacity in the coming years. 

This was stated by Serhii Mamedov, Vice President of the Association of Ukrainian Banks and Chairperson of the Management Board of CB “GLOBUS”.

The banker recalled that, according to the NBU's preliminary estimates, an additional UAH 20 billion in tax revenues could mean UAH 200–300 billion in potential loans that the economy would miss out on in the future. In wartime, this creates additional risks for financing production, restoring damaged facilities, strengthening the energy resilience of businesses and creating new jobs.

He noted that the need for additional budget revenues is entirely understandable. The state requires substantial resources to finance defence and other priority expenditures, and the banking sector should contribute to meeting these needs. However, the fundamental question is what the long-term economic cost of the additional tax burden may be.

“The banking sector must contribute to state financing, especially during these difficult times for the country. But there is a question we must not overlook: what will happen to the economy if we take away from banks capital that could otherwise be turned into loans?” the banker said.

Serhii Mamedov recalled that the increased 50% corporate income tax rate for banks was applied to the results of 2023 and 2024, with both decisions having retroactive effect. In 2025, the rate was 25%, while for 2026 it was once again set at 50%.

At the same time, the banking system already generates substantial tax revenues. By the end of 2023–2025, the total corporate income tax paid by banks had exceeded UAH 257 billion.

However, higher taxation may affect banks' ability to increase their capital, which largely determines their capacity to lend to businesses and individuals.

As the banker explained, the NBU's estimate of a possible UAH 200–300 billion reduction in lending capacity does not refer to loans already issued, but to the resources that the banking system could otherwise channel into the economy in the coming years. The actual scale of this impact will depend on the amount of bank capital, demand for loans and the overall economic situation.

In Serhii Mamedov's view, this effect could be particularly dangerous during wartime, when lending is gradually becoming one of the key instruments for supporting business continuity.

Moreover, Ukraine's economy already has a relatively low level of lending to the private sector. According to the World Bank, domestic credit to the private sector as a share of Ukraine's GDP stood at 18.2% in 2024 and declined to 16.4% in 2025. Although this trend is driven by a combination of economic factors, it further highlights the importance of preserving and expanding the financial system's lending capacity.

Therefore, the banker believes that further restrictions on banks' ability to increase their capital could constrain lending activity precisely when businesses' financing needs remain exceptionally high.

“The budget will receive additional funds, but at the cost of significant risks to production financing, energy resilience, job creation and the investment attractiveness of Ukrainian banks,” he emphasised.

According to the banker, the potential impact of higher taxation on attracting investment into the banking sector deserves particular attention. This issue is becoming even more relevant as the state prepares to sell two banks – Sense Bank and Ukrgasbank.

For potential investors, the decisive factors are not only a bank's financial position and asset size, but also its profitability prospects and the predictability of tax policy. Extending the period of increased taxation could significantly reduce the investment attractiveness of Ukrainian banks and, when combined with other adverse factors, create a risk of halving their potential market valuation. As a result, the state could lose out on substantial privatisation proceeds, potentially amounting to hundreds of millions of dollars.

At the same time, Serhii Mamedov stressed that the discussion around increased taxation should not become a matter of setting the interests of the state against those of the banking system. On the contrary, they share a common goal: ensuring the country's economic resilience during the war and creating conditions for future recovery.

That is why the banker called on members of parliament, while preparing Bill No. 15262 for its second reading, to carefully reconsider all possible economic implications and refrain from supporting the document in its current form.

In his view, extraordinary tax measures must be justified, predictable and genuinely temporary, so that short-term budget revenue does not undermine the long-term potential of the Ukrainian economy.

“Strong banks are not competitors of the state budget. They are one of the tools that will enable businesses to recover, the economy to grow and the budget to generate more revenue in the future,” Serhii Mamedov concluded.