"If institutions fail to do their job, we see the shadow economy flourishing," - says Anna Derevianko
The EBA’s Executive Director made this point in an interview with RBC Ukraine.
“There are no separate statistics within the EBA, but we tend to agree with what the government and analysts are saying. The size of the shadow sector is certainly no smaller than the official figure. We say this based on our gut feeling and what we hear from businesses – it varies across sectors, but the figures are more or less accurate,” noted Anna Derevianko.
According to her, the main reason for the growth of the shadow economy is the result of the ineffective work of fiscal and law enforcement agencies.
“If institutions do not do their job properly, we see a shadow economy that thrives. Then it makes more sense not to pay taxes than to pay them, because it is easier to bribe your way out of it. The formal business sector, which is in the open, becomes an easier target for inspections than the shadow economy.
When state institutions make the right choices in terms of statehood and upholding the law, there will be less tax evasion,” the EVA director is convinced.
She emphasised that the transition from the shadow economy would be faster and more effective if state bodies and law enforcement agencies encouraged the move from the shadow to the formal sector: preventively making it impossible to choose the shadow economy, and, on the other hand, prevented people from illegally exploiting loopholes in the law.
Anna Derevianko also noted that in most cases the issue lies not with the legal provisions themselves, but with their enforcement. As long as enforcement remains at a low level, the share of the shadow economy will continue to grow, as is currently the case.
“It certainly hasn’t shrunk. Companies feel that it certainly hasn’t shrunk. This can be explained by various reasons. In 2022, there was a shock – everyone was adapting to the new conditions. Under such conditions, there was certainly less oversight. When there is less oversight, there is more scope for the shadow economy to develop. When the state prioritises combating the shadow economy in a particular sector and law enforcement agencies target the shadow economy, legitimate businesses feel the impact. “The figures have certainly not gone down,” says the representative of the European Business Association.
It should be recalled that Danylo Getmantsev, Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, stated that parliamentarians are dissatisfied with the slowdown in the de-shadowing of the economy, and that instead of delivering tangible results, the Economic Security Bureau is “feeding” the public with presentations and manipulating figures in its reports.
