The government’s tax collection body on April 8 revised its valuation of the nation’s burgeoning underground economy upward to $34 billion, or nearly 20 percent of gross domestic product. Around 30 percent of the revised figure involves the elicit withdrawal of capital from the accounts of state-run enterprises, according to First Deputy Minister of Revenue and Duties Igor Bilous. Value-added tax schemes are also a huge part of the illegal sector’s architecture, he added.
The revised figure came just five days after Bilous
pegged the shadow economy at $24.2 billion on April 3.
He was appointed as head of the nation’s tax
collection office on March 12, following more than a decade in the private sector.
Previously, the Ternopil native worked for Renaissance Capital and UBS, a Swiss
global financial services company.
However, his estimate is lower than the $61 billion
calculation by the Ministry of Economic Development.
“The difference between these two figures comes from
different methodology… Calculating the shadow economy is a complicated
process,” Oleksandra Betliy, analyst for Institute of Economic Research and
Policy Consulting, told the Kyiv Post.
Europe’s shadow economy last year reached a 10-year
low of $2.9 trillion, according to research conducted by A.T. Kearney
consultancy and Austrian economist Friedrich Schneider who is one of the
world’s leading experts on the topic. On average across Europe, the shadow
economy is as large as 18.5 percent of economic activity, and the figure is
larger in eastern European economies.
Bilous’s figure would place the size of Ukraine’s shadow
sector in line with the European average. However, Schneider’s research has
found that the size of Ukraine’s shadow economy
is more than half of the country’s GDP.
Interestingly, former president Viktor Yanukovych in
2011 said the underground economy is as big as 40 percent of GDP and is a
reflection of the corruption that has spread throughout the country. However,
in the beginning of 2013, when the presidential election became closer, Yanukovych
said the figure was as small as $2.4 billion and just 1 percent of the economy.
The statement was meant to convince the public that the
government of Yanukovych and ex-Prime Minister Mykola Azarov was effective in bringing
the economy out of the shadows.
Kyiv Post
associate business editor Ivan Verstyuk can be reached at
[email protected].
Photo by Anna Korbut/DYVYS
