NV Business examined the progress the government has made on developing and adopting these “economic reservation” measures, the degree to which they address the needs of the national economy, and what President Volodymyr Zelenskyy thinks of the concept.
Three different bills, sponsored by nearly 30 members of the ruling Servant of the People party, introducing economic mobilization deferment for entrepreneurs and their employees have been registered in the Ukrainian parliament. The first (No. 1131) proposes amendments to the mobilization law, while the second (No. 1132) offers changes to the Tax Code regarding the amount of the military tax. Both documents allow companies to reserve an employee by paying UAH 20,000 ($493) in military tax per month. Alternative bills propose to automatically grant deferments to employees earning more than UAH 36,000 ($888) per month or to combine both criteria. For individual entrepreneurs, deferment is contingent on having a monthly income of more than UAH 61,000 ($1,504).
MPs argue these bills would allow small and medium-size businesses to operate without having key employees randomly plucked by military recruiters.
We ventured to determine how likely each of these proposals is to pass, and what the executive branch thinks about economic mobilization deferments.
Not supported by Zelenskyy, but backed by his entourage
The discussions around economic mobilization began earlier this year.
Dmytro Natalukha, the chair of the parliamentary Economic Development Committee, argued the measure would incentivize over a million men to abandon tax evasion and generate UAH 200 billion ($5 billion) in annual tax income. The government will then spend the additional funds to finance the ever-growing needs of the Ukrainian military.
Some generals and MP opposed rapidly passing the bills. They believe this could harm ongoing mobilization, offering eligible men an opportunity to buy a way out of service.
In their opinion, the proposal unconstitutional, because it introduces a property qualification for military service.
Meanwhile, supporters of economic reservation point out that wealthy citizens already have the means to protect themselves from being drafted into the army—through corruption.
An NV source in the General Staff said the military seems to have a negative attitude towards economic reservation.
Zelenskyy doesn’t yet support the introduction of economic mobilization deferment, a senior parliamentary official said, adding that “many people oppose it; I don’t think it will work.”
Serhiy Nikiforov, Zelenskyy’s press secretary, is yet to confirm the president’s position on this issue.
David Arakhamia, the Servant of the People party chair and member of the parliamentary Defense Committee, joined the discussion on this issue back in May. He noted the committee had studied the experience of different countries on this issue, but “no matter what decision you choose, there are many people who support this initiative and many who are against it.” Back then, Arakhamia believed that “some model will appear in the discussions that will cause the least outrage.”
Ukrainian presidential adviser Mykhailo Podolyak in late June also spoke in favor of the introduction of economic reservation.
The primary reason is the lack of funding. In particular, it was reported in June that the state budget is nearly $5 billion short, which, according to Natalukha’s estimates, economic reservation could bring.
Existing reservation model remains flawed
Mariana Bezuhla, deputy chair of the Defense Committee, has criticized Commander-in-Chief Oleksandr Syrskyi for the lack of reforms in the army, emphasizing that defense contractors complain about blackmail by military recruiters: “On the one hand, they have recruitment centers, on the other hand, they have the Defense Ministry and the Economy Ministry, which have been holding up reservation requests for months.”
In a conversation with NV Business, Bezuhla reiterated that the ministries are failing to respond to reservation requests in a timely manner. She believes economic reservation should be considered only after the government sorts out processing reservation requests.
Off the record, the Economy Ministry told NV that reservation requests were being processed more slowly after Deputy Economy Minister Ihor Fomenko resigned.
The Cabinet already moved to streamline the reservation pipeline in June, accepting the requests through the Diia e-governance app, which shortens the procedure to 60 minutes, the Economy Ministry’s press service said.
The ministry later added that consultations on economic mobilization are underway, considering the social dimension of the question, with input from the business community and the military.
At the same time, Natalukha insisted that even the updated government policies do not meet the needs of the Ukrainian economy and still provide no direct state revenues. That’s why the committee, he said, will continue to push the parliament to consider economic reservation options.
The first committee hearings on the issue are scheduled for mid-July.