The annual execution of the Consolidated Budget of Ukraine with a deficit determines the need for borrowing and increases the country's public debt. Failure to receive a significant amount of funds in the budgets of different levels is provoked primarily by tax evasion by a significant part of potential taxpayers. This applies in particular to the personal income tax, the bulk of which comes from the collection of salaries of individuals. The purpose of the article is to identify the impact of informal employment and non-payment of taxes on the budget's shortfall of a significant amount of tax revenues, to determine the possible consequences of this phenomenon and ways to minimize it. 2020 increased Ukraine's Consolidated Budget deficit almost threefold compared to 2019. This increase in the budget deficit was due not only to the emergence of unplanned costs associated with the negative consequences of the pandemic, but also to a reduction in tax revenues due to the quarantine restrictions imposed by the authorities. The excess of government spending over revenue has once again exacerbated the question of whether the state uses all its resources efficiently to fill the budget. Of course, it is difficult to fully assess how much the Consolidated Budget loses revenue each year due to corruption, money laundering, the shadow economy and a number of other factors. However, in the article, based on open data on the number of informally employed, we tried to estimate the budget losses from personal income tax from wages, based on the number of informally employed during 2014-2020, and compare the results with the size of the Consolidated Budget deficit of Ukraine similar period. This allowed us to assess the possibility of overcoming the budget deficit by removing a large number of informally employed workers from the shadow of income. It is determined that shadow employment is only one of the many factors of budget revenue shortfalls, but overcoming it can significantly reduce the budget deficit. However, overcoming informal employment and the shadow economy in general requires not only increased control over business activities and the payment of taxes, but also a set of measures to stimulate indirect impact, which in the medium term may lead to economic entities out of the shadows and legalize their income.
Personal income tax as a tool for overcoming regional budget deficit