THE INFORMAL SECTOR OF THE ECONOMY AND TAX REVENUE LOSSES. THE CASE OF UKRAINE

The article is devoted to the problems of tax revenue losses which are caused by informal sector of the economy. The level of risk associated with illegal financial flows by sectors isshown. Different opinions about shadow (informal) economy appearance and influence were studied. The main factors which are related to the shadow economy growth in Ukraine areexplained. Different methods to calculate the share of informal economy in Ukraine wereused. The relations between shadow economy and tax revenue losses are explained. The shadow added value and losses of VAT revenue based on taxation methods in Ukraine arecalculated. The amount of budget revenue of income taxes losses is calculated. The refine onmethod of shadow economy estimation was proposed. The tax payer’s motivation for the tax evasion is explained. Therefore, further changes in tax legislation should be implementedtaking into account the identified trends in the formation of informal financial flows as a tax payers reaction on the government activity.

Keywords:

taxation , informal sector of the economy , tax revenue losses , financial flows