Ukrainian government seeks to use tax paid by service personnel to fund arms production

FILE PHOTO: Ukrainian Prime Minister Denys Shmyhal speaks as he meets Irish Prime Minister Leo Varadkar,

KYIV (Reuters) - Ukraine's government has drawn up a draft law to allow it to use funds raised from income tax paid by service personnel to fund wartime arms purchases and production, Prime Minister Denys Shmyhal said on Thursday.

The tax, that currently goes to local budgets rather than the central budget, was projected to raise more than 96 billion hryvnias ($2.6 billion) this year.

"Our Security and Defence Forces need more resources," Shmyhal wrote on the Telegram messaging app.

Kyiv has been ramping up weapons production as well as receiving arms from its Western allies since Russia's full-scale invasion in February 2022.

Diverting the funds from regional budgets could boost Ukraine's efforts to narrow the gap between its own military capabilities and those of its much larger neighbour.

Local budget revenues from the income tax paid by service personnel have increased eightfold since the invasion, Shmyhal said.

Under the draft law, 25.8 billion hryvnias would be allocated to the state budget this year and 93.7 billion next year, he said.

More than 200 billion hryvnias already accumulated in local budgets will remain at the disposal of local authorities, and communities that are short of funds will receive a subsidy from the state, he said.

($1 = 36.9290 hryvnias)

(Reporting by Anna Pruchnicka, Editing by Timothy Heritage)