State tax and labor services crack down on $18 billion in shadow salaries

For businesses in Ukraine, avoiding taxes has long been one of the ways to remain competitive and circumvent bureaucracy.

Businesses still frequently pay full or partial salary in cash. The “envelope salaries” allow them to avoid a 41.5 percent tax on wages – the combination of income and other payroll taxes. Other times, employees register as “individual entrepreneurs,” like contractors, who are only required to pay a 5% tax on their income.