Ukraine’s shadow economy ‘steals’ more than €19.5 billion a year: MP Hetmantsev named the most problematic sectors

The volume of unpaid taxes due to shadow schemes in Ukraine is estimated at more than 1 trillion hryvnias (€19.56 billion), which creates unequal conditions for competition—particularly in the agricultural sector, retail, and processing industries.

This was reported by Danylo Hetmantsev, head of the parliamentary committee on finance, tax and customs policy, speaking on the TAX Podcast.

The lawmaker noted that the key problems of Ukraine’s economy remain smuggling, “envelope” wages, and VAT manipulation through the splitting of large businesses into networks of sole proprietors (FOPs).

“We have more than a trillion hryvnias in the shadows. This money could have been directed toward increasing salaries for teachers and medical workers and paying pensions. Right now these funds are effectively being drained from the budget and the army,” the MP emphasized.

Hetmantsev added that the practice of large retail chains using FOPs to avoid paying VAT distorts the market environment. As an example, he cited franchise schemes in retail where customers receive multiple receipts at checkout: one for alcohol under the general tax system, and another issued through a FOP. In the committee head’s view, this gives such businesses an unfair advantage of 7–20% due to unpaid VAT.

“If within one jurisdiction we allow the parallel existence of a white and a black system, we have no future for normal economic development. This distorts the conditions for fair competition, and transparent business suffers,” he said.

He also stressed that de-shadowing the excisable goods market (fuel, tobacco, and alcohol) remains a парламент priority for 2026. Despite some progress in the fuel sector, the tobacco industry saw a setback at the end of 2025: the share of the illegal market rose again to 18%.