Ukraine weighs new tax revenue source to help fund war effort – WSJ By Investing.com

Investing.com — Ukraine is considering legalizing and taxing an industry that currently operates largely outside the formal economy, potentially generating up to $25 million in annual revenue that could be directed toward the country’s mounting defense needs, the Wall Street Journal reported on Saturday.

A bill that would legalize pornography in Ukraine is awaiting a second reading in parliament after passing its first vote in July. Supporters are framing the proposal partly as a way to bring an existing online industry into the tax system at a time when Kyiv faces enormous wartime spending requirements.

Opposition lawmaker Yaroslav Zhelezniak, who chairs parliament’s finance committee and co-authored the legislation, estimates taxation could raise as much as $25 million annually.

The amount is small relative to the roughly $120 billion Ukraine says it needs each year for defense. Yet lawmakers estimate $25 million could finance approximately 30,000 drones, highlighting how even relatively modest new revenue streams could contribute to military procurement.

Ukraine already has a sizable online creator economy operating under legal uncertainty. Data supplied to tax authorities showed 7,900 Ukrainians earned more than $131 million through OnlyFans in 2023, creating millions of dollars in potential tax liabilities.

Current laws create an unusual problem for tax collection. Producing and distributing pornography remains illegal, meaning people who declare income from the activity can potentially expose themselves to criminal prosecution.

The situation has also encouraged some Ukrainians to operate from abroad, shifting potential tax revenue to other countries.

Supporters of legalization argue that bringing the activity into the formal economy could expand the tax base, reduce opportunities for corruption and allow authorities to redirect law-enforcement resources during the war.

One Ukrainian creator cited in the report said she had already paid about 40 million hryvnias, or roughly $900,000, in taxes. She argued that amount alone was equivalent to the cost of around 2,000 drones or 100 military pickup trucks.

The proposal comes as Ukraine searches for additional domestic sources of revenue to supplement extensive foreign financial and military assistance. 

Even if the projected $25 million represents only a fraction of overall defense spending, supporters see legalization as another potential source of funding for the country’s war effort.