In Ukraine, transparent businesses that comply with tax regulations are increasingly facing scrutiny from regulatory bodies, according to Anna Derevyanko, Executive Director of the European Business Association (EBA). She emphasized that the issue stems not from a lack of legislation but from selective enforcement and weak institutional oversight.
Derevyanko pointed out that in countries with strong institutions, such as Switzerland and Poland, tax evasion is significantly curtailed due to effective regulatory frameworks. Conversely, in Ukraine, businesses that operate transparently often find themselves under more intense examination than those employing gray market tactics, which can evade accountability.
“Human nature tends to seek loopholes. In nations where institutions function properly, widespread abuses are simply not feasible. When institutions fail to perform their duties, businesses may find it easier to evade taxes rather than comply,” Derevyanko explained.
The EBA leader stressed that the core issue lies in the systemic inability of the state to uphold the rule of law. This failure places legitimate businesses at a disadvantage compared to their shadowy counterparts.
“When institutions do not fulfill their responsibilities effectively, we witness a thriving shadow economy. It becomes more logical for businesses to avoid tax payments, as it is simpler to bribe than to pay taxes. Transparent companies become easier targets for inspections than those operating in the shadows,” she added.
To address these challenges, the EBA advocates for foundational reforms, including overhauling the judicial system, ensuring genuine rule of law, and establishing impartial oversight from law enforcement agencies. Derevyanko stated, “Instead of continuously creating new regulations, the government should focus on enforcing existing laws. Only then will honest businesses cease to be the easiest targets.”
The EBA has repeatedly urged the authorities to consider these issues and implement systemic changes that would create a level playing field for all market participants.
The European Business Association highlights the challenges faced by transparent businesses in Ukraine, calling for reforms to strengthen institutions and uphold the rule of law. Derevyanko emphasizes the need for better enforcement of existing regulations to ensure fair competition.