Instead, Ukrainian authorities presented plans to bolster their finances with the issue of its first war bond denominated in U.S. dollars, in addition to its local currency, in order to further tap foreign investors for much needed capital to finance its military spending.

Amid massive destruction in major cities like Kharkiv and Mariupol, Zelenskyy on Tuesday unveiled the first steps of a plan to bring maximum relief to Ukraine’s crippled economy, which is operating under martial law. 

These included the introduction of a simplified flat tax that is entirely voluntary: “If you can, pay,” he said in a statement. For those small businesses that cannot, however, there will be “no questions asked” by the government. 

Instead of income tax and a value-added tax, the government is going to levy only a simple rate of 2% of turnover, according to Zelenskyy. 

The measures are badly needed. A survey by the European Business Association published on Monday showed that just 13% of small and medium-size businesses in Ukraine (SMEs) are continuing to work in full, while 42% are not operating at all.

Courtesy of European Business Association

Further measures are already under consideration as part of a second stage of tax reform. Zelenskyy added that his government also plans a bonfire of its regulatory regime to facilitate commerce amid the warfare. 

“We cancel all inspections for all businesses—so that everyone works normally, so that the cities come to life, so that life continues wherever there are no hostilities,” he said.  

“The only condition is that you ensure the normal operation of your business in the framework of Ukrainian law.” 

While Zelenskyy didn’t clarify further, this reference to domestic law is likely calling out any areas of the country that might consider relinquishing sovereignty to Russia. 

The war was triggered after the pro-Russian breakaway provinces of Luhansk and Donetsk requested Vladimir Putin send in what was called “peacekeepers” to protect them from unsubstantiated allegations of oppression and even genocide by the government in Kyiv.

The measures announced by Zelenskyy should provide at least some measure of relief to an economy that has already sustained $120 billion in damages, according to information on Friday from Deputy Economy Minister Denys Kudin. 

Previously the only estimate of the scale of the destruction was a figure of $10 billion in damage to the country’s roads, bridges, and infrastructure since the invasion, given at the start of last week.

To help finance its fight against Russia’s invasion, Ukraine earlier this month issued one-year military bonds at reduced interest rates of 11%, in an appeal to patriotic Ukrainians. 

After first raising 8.1 billion hryvnia ($277 million) and a further 6.6 billion last week, the Ukrainian Finance Ministry said it will issue its third war bond on Tuesday, and the first that will also be denominated in U.S. dollars.

“Currently, the website of Ukraine’s [Ministry for Finance] is under cyberattacks and is closed for access from outside of Ukraine,” it posted to LinkedIn, adding more information on the bond auctions can be found on Ukraine’s page in the Bloomberg terminal.