Why the business does not want to grow
In its report, the IMF notes that the main problem is the linking of tax rules to the size of the enterprise.
After reaching certain financial indicators, companies are faced with a significant increase in the tax burden and new requirements for conducting activities. Because of this, many entrepreneurs deliberately refuse to expand or look for ways to stay within the preferential regimes.
Which thresholds create the greatest risks
The Fund has identified several key financial limits that have the greatest impact on business development:
UAH 1 million — mandatory registration as a VAT payer;
UAH 40 million — loss of the right to simplified income tax accounting;
UAH 150 million — the beginning of the application of transfer pricing rules.
After exceeding these indicators, the administrative and tax burden increases sharply.
How companies bypass the system
In order to avoid additional costs, part of the business artificially restrains development or divides the activity into several separate enterprises or FOPs.
According to the IMF, this practice leads to two negative consequences:
financial reporting ceases to reflect the real scope of companies' activities;
businesses on the simplified system without paying VAT gain a competitive advantage over larger companies, even if they work less efficiently.
What does the IMF offer?
For the development of medium-sized businesses, the Foundation recommends a number of tax changes.
Key proposals include:
- to implement effective mechanisms for combating the artificial fragmentation of business;
- revise the rules for exemption from VAT for single tax payers whose turnover exceeds the basic turnover threshold;
- to transform the State Tax Service into a modern service body by introducing automatic filling of declarations and simplifying the transition from the simplified taxation system to the general one.
Why is it important for the economy?
The IMF emphasizes that a strong medium-sized business is the basis of sustainable economic development, the creation of new jobs and productivity growth.
At the same time, international financial organizations have recently revised their forecasts for the Ukrainian economy. In particular, the IMF expects that in 2026 the growth of Ukraine's GDP will be only 1–1.6%, while the EBRD predicts an increase in the economy by 2.2%, explaining the subdued estimates as the war's lingering impact on business and investment activity.
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