Reduction of VAT, support for IDPs and businesses: frontline communities present key proposals to the government program

The reduction of VAT on socially significant goods to 5%, new mechanisms to support internally displaced persons (IDPs), tax incentives for businesses, and specific approaches to financing security in frontline territories will be included in the package of legislative and budget initiatives that the Association of Frontline Cities and Communities is preparing for the new composition of the Cabinet of Ministers and the Verkhovna Rada.

As reported by Delo.ua, this was announced during a meeting of the association's board by its head, the mayor of Kharkiv, Ihor Terekhov.

According to him, after the government was updated, the organization intensified the preparation of consolidated proposals from more than 300 communities, which should become the basis for state policy to support frontline territories.

Terekhov noted that the package of proposals will cover three main areas: support for frontline communities, new state policy regarding internally displaced persons, and the formation of a common position of communities in preparing the state budget for 2027 and the Budget Declaration for 2028-2029.

Speaking about support for frontline communities, the head of the association emphasized the need to create economic incentives for enterprises that continue to operate near the front line.

In his opinion, one of the solutions could be the introduction of a reduced profit tax rate for enterprises operating in areas of active and potential hostilities, provided that at least 90% of local taxes are paid to the community budget.

He also proposed to expand business access to state guarantees on loans by increasing the maximum annual income of participating enterprises from 50 million to 100 million UAH.

Separately, Terekhov reported that members of parliament have already prepared a draft law on state support for workers ensuring the livelihoods of frontline communities. The document provides for additional social guarantees, financial support, and insurance.

A separate block of proposals concerns internally displaced persons. According to Terekhov, state policy should not only focus on administering the status of a displaced person but, first and foremost, on integrating people into new communities.

"People should not live for years between 'no longer at home' and 'not yet at home.' State policy regarding internally displaced persons should not focus on administering the status of a displaced person but on the quickest return of a person to a full life," he emphasized.

Among the proposed measures are the creation of a unified support system for IDPs, increasing assistance to displaced persons to 4,500 UAH during the first six months after relocation regardless of family income, as well as a separate mechanism for admission to higher education in frontline cities for youth who could not take the NMТ.

A key element of support, Terekhov noted, is providing housing. According to him, the state should develop mechanisms for long-term rental, social housing, affordable mortgages, and compensation for housing lost in temporarily occupied territories.

A separate block of initiatives concerns budget policy. Terekhov stated that the fight against poverty should become one of the main state priorities alongside financing the Defense Forces.

In particular, he proposed to reduce the VAT rate to 5% on socially significant goods — food products, medicines, and children's goods — similar to the practice of certain European countries. He also advocated for raising the minimum wage to 10,000 UAH and the minimum pension to 6,000 UAH starting January 1, 2027.

Additionally, Terekhov suggested changing approaches to financing the security needs of communities.

"A safe situation should become one of the main criteria for the distribution of funds. For communities in areas of active hostilities, the requirement for co-financing projects should be canceled, and for areas of potential hostilities, it should be reduced to 5%," he noted.

According to him, the association also proposes to introduce annual security plans for regions and communities and provide a separate state subsidy for the construction of shelters, fortifications, backup power sources, and alert systems.

At the end of the meeting, Terekhov urged board members to submit their proposals for the overall package of initiatives. He stated that after the preparation is completed, he will personally present the document to the Cabinet, the Rada, and relevant parliamentary committees.

Earlier, Terekhov spoke about the challenges and priorities of frontline communities on the path to the EU. According to him, restoring the economy, energy resilience, developing infrastructure, and creating conditions for the return of people after the war remain among the key tasks.

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