A blow to individual entrepreneurs: why new tax changes may harm the economy
30 November 2025 22:01
OPINION
The government’s new tax initiatives actually create risks for small businesses. The government decided to quickly fill the budget at the expense of individual entrepreneurs, instead of “stimulating economic activity by expanding the tax base,” “reducing unproductive government spending” or “stealing less.”
This is stated in a post by Anatoliy Amelin, director and co-founder of the Ukrainian Institute for the Future think tank, "Komersant Ukrainian" reports.
According to the new program of Ukraine and the IMF, among the structural beacons is the decision to “cancel the exemptions from mandatory registration as VAT payers for the simplified system.” Amelin translates this simply: “every individual entrepreneur with an annual income of more than one million hryvnias should become a VAT payer.” For professionals with an income of about two thousand dollars, this means a sharp increase in taxes – “from 7% of the effective rate to 20-22% overnight.”
He cites specific figures: “A sole proprietor with an income of two million per year today pays about 140 thousand hryvnias. After the reform, it will be 380-430 thousand. The difference is a quarter of a million.” According to his estimates, 170-250 thousand entrepreneurs, mainly in IT, consulting, and professional services, those who create the most added value, will be affected.
Amelin predicts the reaction of businesses: “A third will register as VAT payers and raise prices,” “a quarter will close their business and hire,” and “100-150 thousand entrepreneurs will choose the shadow economy – income splitting, P2P transfers, crypto, working through foreign jurisdictions.” Some may emigrate: “10-25 thousand highly qualified specialists will simply leave.”
Despite the government’s expectations of receiving 15-20 billion hryvnias, Amelin cites a different arithmetic: losses from the transition of entrepreneurs to the shadow, the effect on counterparties and control costs will yield “a net minus of 12-20 billion per year.” In his opinion, this will lead to the growth of the shadow economy and a drop in official GDP.
He also draws attention to the imbalance between the approach to individual entrepreneurs and residents of Diia.City and Defence.City. “How do they differ from the simplified system? Nothing but lobbying opportunities,” the expert notes. Amelin calls it paradoxical that the government is “proud of Diia.City while destroying the sole proprietorship, the base from which these companies grow.”
As an alternative to the government’s ideas, he suggests reducing the state apparatus, fighting smuggling, and reducing corruption losses. Business, he emphasizes, is “1.7 million jobs” and the basis of the middle class. Therefore, the question Amelin raises remains key: “why is it easier to destroy 150,000 businesses than to cut 150,000 officials?”
