Parliament approved Ukraine’s first major wartime tax increases on Thursday to shore up its finances as war with Russia drags on with no end in sight.

Yaroslav Zhelezniak, a lawmaker from the Holos party, said 247 of 450 deputies in the Verhovna Rada had approved the increase.

Ukraine spends the bulk of its revenue on funding its army, and the current level of taxation has been insufficient to cover rising defence spending, which has boomed since Russia’s full-scale invasion in February 2022, the finance ministry said.

Foreign financial aid remains vital for Ukraine to be able to balance its budget in the coming year.

Since the start of Russia’s invasion, Ukraine has received nearly $100 billion in western economic aid, which helps to pay pensions, public sector wages and other social spending. Kyiv needs another $12 billion by the end of 2024 to spend on defence. Next year’s budget deficit is expected to total about $38 billion.

The new law includes an increase in war tax from 1.5 per cent to 5 per cent for residents, higher taxes for individual entrepreneurs and small businesses, a 50 per cent tax on banks’ profits, and a 25 per cent tax on the profits of financial companies.

Iryna Geraschenko, a lawmaker from the opposition European Solidarity party, said the new taxes would apply retroactively from the start of October. It was not immediately clear how much additional money would be raised after lawmakers introduced a number of amendments during the debates.