Tax chief: 4 million Ukrainians haven’t paid taxes in decade

There are nearly 30 million economically active Ukrainians aged 15–70, but 4.1 million of them haven’t paid any taxes over the last 10 years.

They represent a “lost decade” of taxation and “are invisible on the tax map of Ukraine,” Oleksiy Lyubchenko, head of the State Tax Service, said during a Dec. 18 appearance on the Freedom of Speech political talk show on the Ukraina TV сhannel.

It’s no secret that Ukraine has an enormous shadow economy. But some of the figures Lyubchenko cited will even shock those familiar with Ukrainian realities.

As of October, the State Tax Service recorded only 10.9 million taxpayers — the real number of officially employed workers in the country.

That means that the current number of taxpayers is almost half of what it was in 2004. And it has been declining since then. In 2014, there were 5 million fewer people paying taxes than a decade earlier.

Complicating matters, the current tax statistics do not include the parts of Donetsk and Luhansk oblasts that Russia invaded in 2014 and now de facto controls or Crimea, which the Kremlin illegally annexed in 2014.

“We’ve lost a decade in collecting labor taxes,” said Lyubchenko, whose office collects personal income, corporate income and value added taxes, as well as the excise tax on goods made in Ukraine and rental payments.

Taken together, these taxes provided half of the $45 billion in state budget revenue in 2019. The personal income tax alone is responsible for around 13% of that revenue. Even the 20% value added tax, which is included in the prices of most goods and services, ranks second.

According to last year’s statistics, 11.8 million Ukrainians who are able to work “did not make any money,” Lyubchenko said. To him, that simply means that most of them work unofficially.

In order to evade taxes, many Ukrainian employers continue to pay “wages in envelopes,” he said. Even if they hire people officially, some employers pay the minimum wage required by the state on the books and the rest of the salary under the table. 

As a result, Ukraine’s current pension fund deficit is 40.5%, or $637 million. Shockingly, in 2019, there were 11.2 million people who received official salaries and 11.3 million pensioners. 

According to official statistics, the economically active population in Uzhgorod (63%), Chernivtsi (53%), Odesa (48.3%) and Lviv (45.8%) oblasts dodged taxes the most. The situation in Kyiv (30%), Chernihiv (30.7%) and Poltava oblasts (31%) is better.

(c) KyivPost

9 comments

  • When Ukrainians see where their money went when Yanu was in charge, can you blame them for not paying taxes?

    Liked by 4 people

    • It’s a pain too. Some journalists I know went through the transition and the process was not easy so I can understand some reluctance from the business owners. Another problem is the “black money” that flows during elections. Some people say if politicians can use black money why can’t everyone else?

      Liked by 4 people

      • Incentive has to come from the top down, if the public know that politicians are committing fraud every minute they are awake, they are going to do the same. The tax office needs cleaning out, like many other departments in Ukraine. Yanu treated tax like his personal piggy bank, and no president since, has done anything about it.

        Liked by 4 people

  • One solution is to abolish income tax and recalibrate VAT. A tax on spending is the fairest tax of all and is guaranteed to squeeze some revenue from the evaders. The total tax revenue will increase dramatically, freeing off more to pay out for pensions.

    Liked by 3 people

    • Problem is, smuggling is also rampant in Ukraine, customs and excise is rotten to the core. This is another area that needs cleaning up badly.

      Liked by 4 people

    • The problem is that people with a small income will pay tax (VAT) of all they earn. People with more money will only pay tax of what they use, the rest is tax free.

      Liked by 2 people

      • In Britain, annual personal allowances amount to £13,000, which means that 42% of the population pay no income tax at all. 1% of taxpayers pay about 37% of all income tax raised. I think that is a pretty fair system. Probably other developed nations do something broadly similar.
        No one starves in Britain. Kids from ‘poor’ families get free school dinners. Even though inevitably their parents drink, smoke and pay a subscription to Sky TV with their welfare money.
        In Ukraine, which genuinely is a poor country, things are different. With little or no welfare payments to fall back on, people must work or starve. Ukraine’s corruption and poverty caused entirely by 60 years of thieving, mass murder, torture, misery and cronyism under Russian occupation. It’s still a weak nation state due to Russia’s systematic genocide of middle class professionals in the 20’s and 30’s.
        Therefore you have to think outside the box. No US president is on the horizon who will take the necessary steps needed to force a change of foreign policy by the nazi rodent.
        Therefore Ukraine must help herself. It is indeed possible to abolish income tax, create a much fairer system and increase tax revenue by the method I outlined. Recalibration of VAT to create a more equitable system and a more dynamic and wealthy economy is achievable. Everyone’s a winner under that system; particularly pensioners and the sick.
        Building a healthy, high growth economy in Ukraine is the best way to defeat the occupiers.

        Liked by 1 person

      • Ukraine has some tax exemptions but that could be increased too.

        Liked by 1 person

  • The big, corrupt guys show the little people how it’s done. The Germans have a saying; the fish stinks from the head first. Clean up the corrupt shitheads in the government, judicial system and business and the general negative attitude to taxation will change.

    Liked by 3 people

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