Analysts from the Economic Expert Platform reported significant changes in the structure of Ukraine’s shadow economy. The main findings were presented at the Forum “Dialogue Between Government and Business: New Opportunities for MSME Development,” organized by the Ukrainian Business Council with the support of UNDP.
This is reported by Finway
Increase in “Envelope” Payments and Budget Losses
According to experts’ estimates, payments to unregistered workers and “envelope” salaries for employees on minimum wage have increased to 280–540 billion UAH per year. This results in state budget losses amounting to 140–280 billion UAH, significantly exceeding last year’s figures (115–230 billion UAH).
“Envelope salaries are the most challenging scheme to combat. We need to strengthen public pressure to address this issue,” said Danilo Hetmantsev, head of the Verkhovna Rada Committee on Finance, Taxation, and Customs Policy.
Other Major Shadow Economy Schemes
In second place for budget losses is “grey imports” and smuggling. Their volume is estimated at 400–640 billion UAH, with budget losses of 120–185 billion UAH (previously 120–167 billion UAH).
Counterfeit and illegal excise goods rank third in terms of economic harm. The turnover of such goods amounts to 126–140 billion UAH, while the budget loses 39–43 billion UAH from this activity (last year 35–40 billion UAH).
Oleg Hetman, coordinator of the expert groups at the EEP, emphasizes that there is also an increase in losses from:
- informal self-employment — 12–17 billion UAH,
- the use of individual entrepreneurs instead of official employment — 12–14 billion UAH,
- underreporting of individual entrepreneur turnover — 9–15 billion UAH.
At the same time, some schemes show a decrease in loss volumes. In particular, offshore schemes — 12–14 billion UAH, land and real estate scams — 18–20 billion UAH, and so-called “rollbacks” — 13–15 billion UAH.
According to Oleg Hetman, total losses from all identified shadow economy schemes reach 500–600 billion UAH per year. If we consider the estimate of the shadow economy at 30% of GDP, total losses could approach 1 trillion UAH annually.