The greatest losses to the Ukrainian budget are caused by shadow schemes in excise-taxable sectors, construction, the trade in household appliances and electronics, as well as in food and non-food retail. In these sectors alone, the state loses out on around 80–100 billion hryvnias annually.
Across the economy as a whole, the losses are significantly greater. Paying wages ‘under the table’ costs the budget 200–265 billion hryvnias a year, whilst smuggling and ‘grey’ imports account for a further 105–120 billion hryvnias. Other common schemes include VAT minimisation, evasion of excise duties, undeclared labour and the artificial fragmentation of businesses through sole traders.
At the same time, the situation in certain sectors is gradually improving. In the fuel market, the share of the shadow economy, which stood at 34 per cent in 2022, fell to 14 per cent in 2024 and to approximately 9 per cent by early 2026. This was facilitated by the systematic attention of the parliamentary committee, as well as the work of the State Financial Inspection and the tax authorities. However, significant differences in the tax burden and levels of official salaries still persist among operators.
In the retail sector, analysts have noted abnormally low wages, an insufficient number of officially registered employees and the fragmentation of large chains. Losses resulting from fragmentation alone are estimated at 2.5–4 billion hryvnia per year, whilst off-the-books wages and undeclared labour cost the budget tens of billions more. In the technology and electronics market, losses amount to approximately 12–15 billion hryvnias. Similar signs of tax minimisation have also been identified in large construction companies.
Introducing VAT for all sole traders with a turnover exceeding 1 million hryvnias will not solve the problem, but will encourage the concealment of revenue and further fragmentation of businesses. Instead, Ukraine needs clear criteria for employment relationships and high-risk schemes, the calculation of tax gaps, transparent performance indicators for the State Tax Service, customs and the State Financial Inspection, control over supply chains, the publication of sector-specific data, and incentives for buyers to demand fiscal receipts. It is systemic institutional changes, rather than a general increase in the tax burden, that can ensure genuine de-shadowing.