The Economist Explained How Raising Taxes Will Hit the Labor Market.

An increase in taxes and military levy in Ukraine will cause a significant rise in shadow wages. This was reported by the CEO of Advanter Group, Andriy Dlygach.

According to Dlygach, if earlier about 35% of wages were in the shadow sector, then after the tax increase this number will rise by 30% and will account for 45% of the total amount.

Dlygach also noted that entrepreneurs have long complained about the unpredictability of state policy, which is the second most important problem after the war. They point out that the sudden increase in taxes destroys their business models and forces them to rethink operations in Ukraine.

The economist stressed that raising taxes on labor and personal income makes business inefficient, forcing entrepreneurs to transfer part of the employees into the shadow to save their business. According to his estimates, this will result in the state missing out on about 40 billion hryvnias in the budget next year.

On October 10, the Verkhovna Rada voted to raise taxes, which will already affect the October salaries of Ukrainians. In the budgetary sector, where salaries are officially accrued, they will decrease by 3.5% due to the increase in the military levy from 1.5% to 5%.