War never changes. It destroys human, material, and financial resources. The war has been going on in Ukraine for 9 years, since 2014. Can you imagine the scale of the tragedy?
Did you know that Ukraine's daily war expenses amount to about $2 billion? Prime Minister Denys Shmyhal has revealed this information in an interview recently. According to him, the total losses from the destruction of infrastructure are about $4 billion daily. And how much does the state receive over the same period? Much less.
Together We Have Preserved Our Statehood and Economy
Ukraine's budget would have collapsed in the first months of the full-scale invasion without foreign investment, direct financial support, and logistical assistance. But not only our external partners are keeping the country going. The Domestic business has mobilized and directed its efforts to fill the budget and support the Armed Forces.
The IT sector also played a role in this. In 2022 alone, revenue from digital services exports grew by 9.9% to $6 billion. These funds were duly taxed and transferred directly to the needs of the Armed Forces.
Almost all IT companies have provided such assistance, including Lampa Software IT outsourcing company, whose team even refused to reduce the tax rate in favor of the state.
Overview of the Economic Situation in Ukraine as of the Beginning of 2023
According to the data published by the KSE, losses among civilian infrastructure alone are about $68.2 billion. This sum includes:
residential buildings (26 million sq. m.);
educational institutions;
office centers;
utility companies;
medical institutions;
financial institutions;
logistics centers;
energy companies.
Also, according to the Ministry of Finance of Ukraine, approximately 30% of Ukrainian companies have closed, while 45% continue to operate but have significantly reduced their activities.
Despite this, Ukraine has withstood not only from a military perspective but also from a financial one. There was no default, and thanks to the support of partners and domestic businesses, the risk of default has been significantly reduced.
Moreover, the beginning of 2023 was marked by a significant increase in investment. First, in relatively safe regions far enough from the front line.
Losses Exceed Budget Revenues
As of April 1, 2023, the total losses during the war amount to approximately $600 billion, and this is just an approximate figure. For comparison, Ukraine's GDP in 2021 barely exceeded $200 billion. This calculation is based on material and technical resources. If we look at the broader picture, the damage inflicted on the environment is significant for Ukraine and the planet as a whole.
Add to this the exit of some large and medium-sized companies from the Ukrainian market due to economic and security risks. And also:
staff reductions;
closure of enterprises;
mobilization;
forced migration.
All of these are contributors to the economic decline. However, not everything is as bad as it seems at first glance. Business activity is partially recovering, demand for domestic products, and budget revenues are increasing.
Stagnation of Leading Industries
The key sectors of Ukraine's GDP – diversified industry, agriculture, and services – have suffered the most significant losses. Almost all regions of Ukraine have been affected, from the simple destruction of businesses to mined agricultural land (which can take up to 70 years to clear). Production output and sales have declined, creating a void in the budget with nothing to fill.
The IT sector withstood the challenge relatively well. Most of Ukraine's leading companies managed to relocate to remote regions or left the country altogether. Among those who remained was the Lampa Software team, which overcame all the difficulties with dignity and quickly adapted to the new realities.
Overall, the digital technology segment showed growth dynamics in 2022. Compared to the same period in 2021, it increased by 9.9%.
Talent Shortage
The most painful loss in this war is people. Even if we exclude those killed or wounded, the number of people who have fled their homes has exceeded 12 million. It is clear that some of them stayed within the country (about 7 million), but the rest went mainly to Europe.
According to UN analysts, about 5 million people have left Ukraine, but there is no indication of their plans to return.
Let's face it: not everyone will return from emigration. This is especially true for young people. Some have nowhere to return to, while others have settled in other countries during the war.
And this loss is no less painful for the country than others. Even after the war, Ukraine will not return all the specialists and young talents from abroad and will face a demographic problem.
Will the government be able to create conditions that will encourage people to return to the country? This is an open question.
The Role of IT in the Development of Ukraine and in Supporting the Economy
Although the share of IT in Ukraine's GDP in 2022 was only 6%, this is a fairly high figure given the circumstances. This is one of the few industries that continued to develop despite the unfavorable conditions.
Even during the active phase of the war in Ukraine, the digital technology industry provides funds to the budget, creates jobs, and attracts foreign investment.
Accordingly, this helps strengthen the country's economy, support the Armed Forces, and accelerate the victory and liberation of territories. Therefore, the role of IT in the development of Ukraine and the war against the occupiers is one of the critical positions.
Stable Income
The digital industry is perhaps the only one that has withstood the active bombardment of Ukraine's infrastructure and increased the volume of services within the country and exports to the foreign market. This has allowed it to fill the budget, supporting the country's economy.
More than 2,400 IT development and digital services companies have already resumed operations in relatively safe regions. They create jobs, pay taxes, and donate to the Armed Forces. In addition, brands were actively developing even in more difficult times (i.e., in mid-2022), according to a survey of several companies.
For example, Lampa Software's executives made every effort to retain all its employees. Did they succeed? Yes, they did. Moreover, since the start of the full-scale invasion, the team has expanded by more than 10%. This indicates that the company is sufficiently busy with projects and ready to take on new ones.
Financial and Informational Assistance to the Country
The economic front does not guarantee the country's stability. The war has brought new challenges, including informational ones, the so-called PSYOP. The IT sector took the brunt of the impact of the “Moscow digital hub”. Not only employees of tech companies but also students, enthusiasts, and everyone else joined the ranks of the digital army to counter the aggressor.
Thus, most DDoS attacks, information fakes, and destabilization attempts were repelled. Ukraine showed its strength not only on the battlefield but also online. In addition, in 2022, several OSINT projects were created that worked perfectly, blocking the bank and cryptocurrency accounts of the sponsors of aggression.
Taxation
Until February 24, 2022, taxes were considered a deterrent to the development of companies or, in popular opinion, robbery. After the full-scale invasion, the attitude towards them changed dramatically. Even though the state refused to collect taxes from some types of businesses, the IT sector mostly did not take advantage of this.
Timely payment of taxes guarantees the country's economic stability and even development, which is quite good in a time of war. Responsible IT companies such as Lampa Software continued to pay into the budget in good faith despite the privileges granted. Moreover, they have begun to actively invest in the Armed Forces and civilian protection funds.
How Market Trends Have Changed After 02/24/2022
People say that a person's consciousness cannot change suddenly. As it turns out, that's not entirely true. Shocking factors, such as neighbors' open aggression, act as catalysts for transforming thinking. And in the case of Ukrainians, they have a positive direction.
The whole country has united around a main goal: the expulsion of the occupiers from the sovereign Ukrainian territory. Not only conscious citizens, but also businesses mobilized with human resources and financial and logistical resources.
Refusal to Save on Taxes
Lampa Software and many other conscious IT companies first refused the tax exemption and then the reduced rate (5%>2%). This is shocking since before the invasion started, leading business representatives favored tax cuts.
The reason for this position is to free ourselves from the occupiers and provide the country with the necessary support to achieve victory in this genocidal war.
Revenue Transparency
It's no secret that before the full-scale war, most companies used various schemes to underreport their actual income. The purpose of this was to reduce the taxes that were paid annually from business earnings to the country's budget. Again, after the full-scale invasion, the consciousness of entrepreneurs was transformed.
Ukraine chose the European development path, i.e., an open and logical taxation system, legal relations, etc. This caused a tectonic shift in the way business is done.
Interaction with Government Authorities
The state is a partner of business, not a limiting factor. At least, this is how it should be, and this is what Ukraine's top officials say.
However, we must admit that even now, innovations have not started working in full force, which creates obstacles for companies on the way to scaling. Nevertheless, we should note that the Ministry of Digital Transformation has already implemented several decisions that the business community has warmly welcomed.
How the Government Invests in IT
Businesses, generally, face many challenges that sometimes cannot be solved by conventional methods. The Government of Ukraine has approved a new program of total digitization and, most importantly, a transformation of the state system. Therefore, it was inevitable that the current legislation would impact the entities under its jurisdiction.
It is worth noting that the transformation path has been positive for all business sizes and segments.
Grant-in-aid and Preferences
Reduced tax rates for IT companies, minimized interest rates on business loans, and assistance in brand registration and job creation. This is just the tip of the changes taking place in Ukraine as you read this.
Some preferences have already come into force, while others are still being finalized and modernized. The main thing is that changes are taking place, which will help businesses grow, especially the IT sector.
Diia.City is an Innovative IT Hub Available to Everyone
Diia.City is part of the changes that our country needs. An autonomous economic environment in which the Ukrainian tech sector can progress. Lampa Software experts decided to join the Diia.City service as soon as it started functioning and promoting itself online.
The path of joining is not easy because it is something new for our country. Many processes are unknown but worthwhile. It is necessary to support the Ukrainian IT industry early on to ensure a progressive future for the country.
Leading IT companies in Ukraine must support and adopt trends and advanced business models. This is the future of our country and the new path of Lampa Software. The team's specialists could not ignore innovations and joined the restructuring and support of Ukraine.
Assistance in relocation, provision of material and technical support
The war affected thousands of businesses. Some were completely destroyed, while others suffered material losses but managed to recover on their own.
Although the IT sector is not as dependent on infrastructure, it has also been heavily affected by various situations. The government must help businesses not only to relocate to relatively safe regions but also to provide generators, fuel, Starlink terminals, etc. All this enables companies to resume activities and contribute to the country's economy.
Lampa Software’s Case of Supporting Ukraine’s Economy: Abandoning the Reduced Tax Rate in Favor of State Development
Today, it is more important than ever to work for the state. It's not enough to pay taxes and comply with the established norms. Much more is needed, like unity, faith in victory, and dedication
From the first day of the full-scale war, Lampa Software has set priorities for itself. One of them is to support the Ukrainian economy.
The company pays taxes to the Ukrainian budget and deliberately refuses the reduced rate offered by the government. After all, the country needs unity and assistance, especially financially, now more than ever.
Lampa Software regularly helps deliver the necessary ammunition and logistics, including:
body armor;
thermal imagers;
vehicles;
other critical equipment for the military.
The company provides ongoing financial support to charities and individual volunteer organizations. In particular, the Come Back Alive Foundation and the Armed Forces of Ukraine Foundation.
Lampa Software was one of the first to mobilize on the economic front and continues to make a significant contribution to the development and victory of Ukraine.
Believing in a Safe and Bright Future for Ukraine
We know that we have already defeated the aggressor. The world knows this and believes that we will soon be able to force the occupiers out of Ukraine. However, it is too early to relax and dream of a brighter future. The war is reaching its hottest phase.
Our current focus should be on mobilizing our resources and offering the state full assistance in the victorious liberation of Ukrainian territories from the Muscovite aggression. We believe in the Armed Forces, in victory, pay taxes, and donate to the army and funds!