Business calls to de-shadow the retail market and improve legislation

23/ 10/ 2025

The European Business Association has appealed to state authorities, calling for systemic measures to de-shadow the retail market and to develop the necessary legislative amendments. According to various estimates, the scale of the shadow economy remains significant — annual losses to the state budget reach 400–450 billion UAH. This situation harms not only the state but also consumers, who face the risk of purchasing low-quality or counterfeit products without proper supporting documentation. The problem of business “fragmentation” One of the key concerns highlighted by EBA member companies is the practice of artificially fragmenting retail chains, when large businesses distribute their operations across multiple legal entities in order to avoid paying taxes in full. Individual entrepreneurs (FOPs) operating under the simplified taxation system are often used for such “fragmentation”. These schemes result in substantial losses in tax revenues and create unequal market conditions. In a letter dated 1 November 2024, the National Bank of Ukraine issued recommendations to financial institutions on identifying signs of such schemes. However, the root of the problem, the legislative possibility of “fragmentation,” remains unaddressed. This significantly complicates efforts to combat such practices in a systematic manner. Business proposals For this reason, the business community suggests amending regulatory acts, in particular to: prohibit the use of the simplified taxation system for the fragmentation of large corporate groups; introduce fines for the abuse of the simplified business regime; empower banks to identify related groups of individual entrepreneurs and to regularly inform supervisory authorities of high-risk transactions. The EBA also proposes developing regulations to address: the identification of groups of individuals or FOPs engaged in regular business activities while evading taxes; procedures for information exchange between banks and supervisory bodies regarding companies suspected of tax evasion; methods for determining the scale of business activities concealed from taxation and identifying the responsible parties. In addition, businesses propose that the National Bank establish a register of persons whose payment transactions require enhanced monitoring. This register would enable the timely detection and restriction of activities by entities exhibiting signs of tax evasion. The European Business Association has already sent the corresponding letter to Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy; Serhii Marchenko, Minister of Finance; Lesia Karnaukh, Acting Head of the State Tax Service; and Andriy Pyshnyi, Governor of the National Bank of Ukraine. The EBA expresses its readiness for an open dialogue with the relevant authorities to jointly develop solutions that will promote economic de-shadowing, greater market transparency and fair competition.

The European Business Association has appealed to state authorities, calling for systemic measures to de-shadow the retail market and to develop the necessary legislative amendments.

According to various estimates, the scale of the shadow economy remains significant — annual losses to the state budget reach 400–450 billion UAH. This situation harms not only the state but also consumers, who face the risk of purchasing low-quality or counterfeit products without proper supporting documentation.

The problem of business “fragmentation”

One of the key concerns highlighted by EBA member companies is the practice of artificially fragmenting retail chains, when large businesses distribute their operations across multiple legal entities in order to avoid paying taxes in full. Individual entrepreneurs (FOPs) operating under the simplified taxation system are often used for such “fragmentation”. These schemes result in substantial losses in tax revenues and create unequal market conditions.

In a letter dated 1 November 2024, the National Bank of Ukraine issued recommendations to financial institutions on identifying signs of such schemes. However, the root of the problem, the legislative possibility of “fragmentation,” remains unaddressed. This significantly complicates efforts to combat such practices in a systematic manner.

Business proposals

For this reason, the business community suggests amending regulatory acts, in particular to:

prohibit the use of the simplified taxation system for the fragmentation of large corporate groups;
introduce fines for the abuse of the simplified business regime;
empower banks to identify related groups of individual entrepreneurs and to regularly inform supervisory authorities of high-risk transactions.

The EBA also proposes developing regulations to address:

the identification of groups of individuals or FOPs engaged in regular business activities while evading taxes;
procedures for information exchange between banks and supervisory bodies regarding companies suspected of tax evasion;
methods for determining the scale of business activities concealed from taxation and identifying the responsible parties.

In addition, businesses propose that the National Bank establish a register of persons whose payment transactions require enhanced monitoring. This register would enable the timely detection and restriction of activities by entities exhibiting signs of tax evasion.

The European Business Association has already sent the corresponding letter to Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy; Serhii Marchenko, Minister of Finance; Lesia Karnaukh, Acting Head of the State Tax Service; and Andriy Pyshnyi, Governor of the National Bank of Ukraine.

The EBA expresses its readiness for an open dialogue with the relevant authorities to jointly develop solutions that will promote economic de-shadowing, greater market transparency and fair competition.