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.