While analysts point to a correlation between the new tax legislation and higher closure rates, officials maintain that the changes are not excessively burdensome when compared to EU standards.
Context: Tax Law and Increased Closures
According to data from Opendatabot, over 22,500 individual entrepreneurs ceased their activities following the enactment of a new tax increase law signed by President Volodymyr Zelensky. On November 29, the day the law came into force, a notable spike occurred, with more than 2,300 individual entrepreneurs closing their businesses. Following that date, daily closures averaged about 1,000, up from a typical 700 per day.
Official Data: Growth in Newly Registered IEPs
In response, Danylo Hetmantsev, the head of the parliamentary tax committee, presented figures that tell a more nuanced story. He stated that as of December 1, 2024, there are approximately 2,076,700 individual entrepreneurs in Ukraine. Of these, 272,900 were newly registered this year, exceeding the number of closures by nearly 92,000. Hetmantsev emphasized that between October and November alone, the balance favored 7,000 more newly created entrepreneurs than terminated ones.
“These figures do not indicate either economic growth or decline in entrepreneurship as such,” Hetmantsev said. Instead, he suggested that the simplified single-tax system, intended to support small businesses, had often been misused by medium and large companies to evade taxes.
Seasonal Factors and Reporting Cycles
Earlier data revealed that the highest number of entrepreneur closures was recorded in March (28,690), with additional spikes commonly seen at the end of reporting periods. Opendatabot analysts attribute such fluctuations to entrepreneurs aiming to avoid unnecessary tax liabilities and reduce accounting complexities.
Debate Over the Impact of Tax Changes
The recent uptick in closures following the tax law’s adoption has prompted discussion among stakeholders. Some entrepreneurs argue that the new tax rates are unfair and will stifle small business development. Officials, on the other hand, point out that the rates remain relatively low compared to those in European Union countries.
Opendatabot analysts note that while the tax increase may have played a role in the recent closures, it should be viewed within a broader context that includes pre-existing reporting cycles and the trend of businesses regularly adjusting their registration status.
