The Ukrainian National Lobbyists Association warns that the introduction of VAT for individual entrepreneurs could be a disaster for the economy

The Ukrainian National Lobbyists Association issues an official statement on the government’s initiative to introduce a mandatory value added tax for individual entrepreneurs with annual income of more than UAH 1 million.

UNLA emphasizes that such a step poses serious risks to the economic stability of the state, especially in times of war.

The decision is promoted without the necessary analysis

UNLA notes that the initiative is submitted without substantiated macroeconomic calculations. In particular, the authorities did not provide estimates of the possible impact on:

• employment rate,
• inflation,
• GDP volumes,
• shadowing of the economy,
• state budget revenues,
• economic sustainability of the frontline regions.

There are also no consultations with the business community, expert organizations, economists, and specialized associations.

This is not a fight against schemes, but fiscal pressure on legal entrepreneurs

We emphasize that the myth of the “sole proprietorship as a scheme” is used to justify the reform. In fact, key optimization practices are concentrated in the large sector, while microbusinesses do not have access to offshore mechanisms or complex financial structures.

The attack is aimed at those who ensure the daily operation of the legal business environment.

Potential consequences – a sharp drop in economic activity

According to economic analysts, the following effects are possible if the decision is adopted:

• 100-150 thousand individual entrepreneurs will go into the shadows,
• budget losses of UAH 15-20 billion,
• additional losses of UAH 10-15 billion in related sectors,
• emigration of up to 25 thousand specialists,
• GDP decline by 1.5-2.5%,
• growth of the shadow economy by 3-5%.

The UNLA notes that such indicators threaten to create a budget deficit, reduce economic activity, and weaken local communities.

Individual entrepreneurs are the foundation of the Ukrainian economy

Today, more than 1.7 million individual entrepreneurs provide services:

• jobs,
• family income,
• tax revenues,
• domestic demand,
• community resilience,
• development of the middle class,
• economic decentralization.

Drastic fiscal decisions regarding this sector could undermine the economic independence of the state.

European practice does not provide for such “shock” reforms

UNLA reminds that in the EU countries:

• the threshold for registration as a VAT payer for small businesses is the equivalent of UAH 2-4 million,
• tax policy is aimed primarily at large schemes,
• Each change is subject to public consultation and impact assessment.

UNLA requirements

The Association calls on the authorities:

1. Suspend the initiative to introduce mandatory VAT for individual entrepreneurs.
2. Conduct a full economic analysis of the consequences of the reform.
3. Create an open working group with the participation of business associations, think tanks, parliamentary committees, SME representatives and international partners.
4. Develop an alternative model that will not hit microbusinesses and will be in line with European practice.
5. Guarantee the stability of tax rules during the war.

Position of the Association

UNLA emphasizes that Ukraine’s economic independence begins with the independence of small entrepreneurs.

Tax reforms should be professional, step-by-step, and based on evidence, and not create additional risks for those who keep the country’s economy going during the war.