The World Bank (2021) estimates that prior to Russia’s invasion 42% of companies in Ukraine operated in the shadow economy. This high share of informality is complemented by a blossoming market for fake transactions where companies pretend to sell each other goods they no longer have or have never had. This is done to claim VAT refunds.
As another example, the personal income tax and social contributions are formally levied at 51% of the employee’s net salary. However, around 90% of surveyed businesses claim that they minimise the tax on their employees and in 2021 about 60% of this tax was collected from public-sector employees, which accounted for less than 15% of total employment before the war
As a third example, the corporate income and dividend tax is formally levied at 18%, yet over 70% of corporate tax revenue in 2021 came from the dividend tax paid by large (mostly international) corporations. Small businesses de facto pay a turnover tax, which formally does not exist in Ukraine. Such businesses receive directive from tax officials to pay a certain percentage of their revenue - between 1% and 5% depending on the sector. Often, the turnover tax is paid ‘voluntarily’ as corporate income tax.
