New trends in trade unshadowing were discussed in Ukraine: some industries are making progress in unshadowing, while others are growing in shadow.

On July 1, 2025, Kyiv hosted the conference “De-shadowing of Retail and Services: New Trends” organized by the Ukrainian Business Council in cooperation with the American Chamber of Commerce and the European Business Association with the analytical support of the Economic Expert Platform.

The conference participants – representatives of the government, law enforcement agencies, business associations, and think tanks – discussed the state of de-shadowing in key sectors of the economy and developed proposals for further eradication of “gray schemes”.

According to the research of the Economic Expert Platform, budget losses from the shadow turnover of excisable goods (alcohol, fuel, tobacco) in 2024 are estimated at UAH 35-39 billion, which is 20% less than in the previous period. At the same time, it was noted that there were positive trends in wage growth and positive dynamics of taxes paid in almost all sectors of the economy under study. At the same time, despite the positive dynamics of de-shadowing, this problem remains relevant, especially in the context of wartime and the need for additional budget revenues to finance the Armed Forces of Ukraine.

Yaroslav Zheleznyak, First Deputy Head of the Parliamentary Committee on Finance, Taxation and Customs Policy and Head of the Temporary Select Committee on Economic Security, took a tough stance on the shadow economy. He categorically rejected proposals to ease the tax regime for the fuel market and emphasized the need to reboot key agencies:

“I have high hopes for the new head of the BES and for a reboot of the BES. I do not believe in anything else.”

He also supported initiatives to increase fines for illegal trade, create a “library” of tobacco product samples, and create a drops register.

Pavlo Buzdygan, Head of the Detectives Unit of the National Anti-Corruption Bureau of Ukraine, emphasized openness to cooperation with business in the fight against corruption schemes. He noted that customs and taxation are among the NABU’s priorities, but emphasized that the institution’s mandate is to investigate grand corruption. The NABU representative called on businesses to be more active in reporting corruption schemes, guaranteeing the possibility of confidential cooperation. He emphasized the importance of a systematic approach to fighting the shadow economy rather than targeted measures.

Yaroslav Starovoitenko, President of the Ukrainian Oil and Gas Association, presented a detailed analysis of the industry. According to him, the fuel market in Ukraine has shrunk from 12 million tons in 2020 to 10.6 million tons in 2024 as a result of the war and occupation of the territories. The President of the Association reported a reduction in the number of gas stations from 7,700 in December 2021 to 6,000 in December 2024.

“In our opinion, a significant segment of gas stations went into the shadows, i.e., they started operating in the black. If you don’t have a license, no one sees you,” he explained the reasons for the reduction in official gas stations.

Mr. Starovoitenko cited specific figures for tax revenues: “Almost 200 billion hryvnias were paid in 2024. This is excise tax, this is VAT.” At the same time, he pointed out significant differences in average wages and tax burden between companies: the average tax burden of the association’s members is 2.5 hryvnias per liter, while the market average is only 1.74 hryvnias.

Sergiy Kuyun, Director of A-95 Consulting Group, confirmed the positive dynamics of de-shadowing. According to him, this year experts expect that the taxes paid by filling stations will increase by 70% in two years. Kuyun emphasized the effectiveness of “soft” methods of pressure, in particular, he noted the effectiveness of advance payments of income tax and public data: “In fact, these results have been achieved using fairly soft methods. We highlight these problems, we draw these graphs – and law enforcement focuses their work on abnormal subjects.”

Tetyana Dumenkova, Deputy Head of the Association of Fuel and Energy Business, presented the position of small and medium-sized businesses. She noted that the new model of advance income tax payments has certain drawbacks: “All gas stations that have a license are required to pay an advance payment of 30 to 60 thousand hryvnias every month.”

Dumenkova suggested discussing certain exceptions to the general rule, such as a grace period for new gas stations, gas stations in frontline areas, etc.

Kyrylo Tchaikovsky spoke about the evolution of evasion schemes in the tobacco industry.

“Not only duty-free, but also pseudo-export. The two schemes are combined, so to speak, into this indicator in the Kantar study. And pseudo-exports have been growing significantly in recent quarters,” the expert explained.

According to him, producers formally declare exports to countries like Syria, but in fact the products remain on the domestic market. The expert also suggested creating a “sample library” of products from all manufacturers to identify illegal products on the market.

According to a recent study by Kantar, in April 2025, the overall level of illegal trade in tobacco products reached 16.2% (compared to 14.1% in early 2025), half of which is pseudo-export or duty-free labeled. With this level of illegal cigarette products on the Ukrainian market, annual losses to the state budget of Ukraine due to tax evasion are estimated at UAH 25.2 billion.

Most of the Duty Free or exported products illegally sold in Ukraine – according to the inscription on the packaging – are produced by Vynnykivska Tobacco Factory: Compliment (47%) and Lifa (5%) are the main brands in this category. Another 43% of illegal products are branded by Marshall Fine Tobacco, with the most common brands being Marshall (26%), Urta (9%), and Brut (3%).

Volodymyr Vasylyk, representative of TC Plus, added technical details about the possibilities of combating pseudo-exports and explained the procedure for proving violations through the examination of the Kyiv Scientific Research Institute of Forensic Expertise and the possibility of license revocation without a court decision.

Andriy Solomin, representative of the NORT Association, founder of Cloud Castle Lab, highlighted the problems of shadowing the e-liquid market. According to his estimates, two and a half thousand outlets active in Ukraine operate in the gray zone. Solomin proposed to impose an excise tax on nicotine and to provide for an optimal license cost for retailers and manufacturers: “The state can get 660 million hryvnias a year from licenses for manufacturers alone.”

Yuriy Peroganych, Head of the Association of Information Technology Enterprises of Ukraine, drew attention to the ineffectiveness of existing fines. According to the current legislation, fines for trading without fiscal receipts amount to 100-150% of the value of goods, which, according to Yuriy, allows violators to quickly resume their activities. He proposed to dramatically increase fines to 500-1000% of the value of the goods and speed up the consideration of bills to limit the scheme of duty-free importation through international parcels.

Anton Odariuk, a representative of COMFY, presented new data on electronics smuggling. According to him, 4 out of 5 iPhones are smuggled. According to expert estimates, 81% of iPhones were illegally imported to Ukraine in the first quarter of 2025. Odariuk said that the state loses about 13 billion hryvnias a year in VAT alone from smuggling of equipment, and the market for gray equipment has grown 2.5 times during the war.

The COMFY representative also drew attention to the role of banks in legalizing the gray market: “Banks know where they put their terminals and know what they sell there.” Odariuk named specific financial institutions that provide gray market lending services, including state-owned Privatbank and Oschadbank.

Dmytro Mykhaylenko, head of the CCI Tax Committee, pointed out certain problems in the Internet services market. Analyzing the court practice, experts see that there is a problem with the approach of the State Tax Service to inspections. The courts cancel the STS decisions on formal grounds, because the Tax Service did not conduct a proper inspection of the relevant entities. These approaches need to be changed.

Myroslav Laba, expert of the Economic Expert Platform, shared the results of research on tax payments in the field of Internet services: over the past three quarters, there has been a positive trend in payment – in Q1 2025, UAH 1187 million was paid (excluding national mobile operators), while in Q1 2024, UAH 800 million was paid.

At the same time, there are significant anomalies in the salaries of individual providers: while the average salary in Ukraine exceeds UAH 24 thousand, a number of Internet providers declare much lower salaries – UAH 8-9 thousand per month. Similar anomalies are observed in the level of tax burden, which ranges from 2.5% to 27.8%, which may indicate the use of tax minimization schemes.

Artem Freiuk, Kyivstar representative, noted that their company’s specialists also observe an improvement in the industry, consolidation of the subscriber base by one person or redistribution between legal entities of the same brand, which entails a decrease in the shadow share and an increase in tax payments. For example, according to a study by the Growford Institute, out of more than 2,000 sole proprietorships (73.85% of which had revenues exceeding UAH 1 million) that provided fixed-line Internet access services, in 2023, only 1 sole proprietorship paid VAT to the budget in the amount of UAH 45.3 thousand. Currently, according to the data recently announced by the State Tax Service, this figure is about UAH 100 million.This industry is an example of successful actions by the authorities to minimize gray schemes.

At the same time, challenges remain, such as the use of individual entrepreneurs to provide Internet services with “non-core KVED in the field of electronic communications”; acceptance of payments to the details of individual entrepreneurs with non-core KVED, transfer of funds for Internet services to the accounts of business entities that are not registered in accordance with the Law on Electronic Communications, and therefore operate illegally, etc.

Oleh Loschylin, head of the All-Ukrainian Association of Security Specialists, highlighted the problem of artificially low prices at public tenders. Mr. Loschylin cited the example of Ukrposhta, which set a starting price of UAH 39 per hour of security, while the estimated minimum price was UAH 42.60. Oleh appealed to the head of the PIC on economic security to analyze the security sector and its problems.

Vitaliy Matseliukh, head of the Association of Security Companies of Ukraine, suggested amending the law on public procurement to require participants to take into account all tax costs in their price proposals.

Tetyana Izovit, President and CEO of Ukrlegprom, raised the issue of legislative regulation of online trade with cash on delivery.

Oleksandr Baldynyuk, President of Ukrkondprom, reported that smuggling of instant coffee had completely shifted to the shadow sector after the customs authorities tightened control. Oleksandr called on the authorities to take immediate steps to minimize smuggling of this product.

Oleg Zavorotnyi, representative of the Cyber Police Department, emphasized the need to adopt legislation on criminal liability for drops, reporting a successful case of 974 bank cards found during just one search. He also took the initiative to join all measures aimed at de-shadowing the economy and improving business operations.

Sergiy Fokin, a legal expert, proposed a radical approach – personal responsibility of law enforcement officials for the presence of illegal business in their reporting areas. If it is impossible to prevent illegal trade in certain districts and regions, the relevant law enforcement officials should be dismissed.

The conference participants concluded that the de-shadowing of the economy requires a comprehensive approach, including

• Rebooting key agencies – BES, customs and tax services;
• Increasing fines for illegal trade to economically tangible amounts;
• Creating a drops register and introducing criminal liability for dropshippers;
• Strengthening banks’ control over gray business operations;
• Opening all necessary registers for public control;
• Encouraging consumers to demand fiscal checks (fiscal lotteries).

The next conference on de-shadowing is scheduled in three months to assess progress in implementing the decisions.