: 119-124
Lviv Polytechnic National University
Lviv Polytechnic National University Department of Management and International Business

A large number of possible negative consequences characterizes the shadow economy, namely: the economic crisis, the collapse, the growth of economic crimes, the destruction of business relations, the decline in production etc. All these effects stop and worsen the economic development of the country. The article aimed to evaluate the state and features of the shadow economy in Ukraine, to identify еру factors that affect its value and exploring possible actions to improve the current situation. In the article, authors reveal the concept of "shadow economy" and "shadowing". An important aspect of the paper is the analysis of the current state of the shadow economy in Ukraine and its comparison with the countries of Europe. It is investigated that the level of the shadow economy in Ukraine significantly outweighs its volume in European countries. Among the European countries, the level of the shadow economy in Ukraine is the highest and differs significantly even from the neighboring countries such as Poland and Romania.
The article highlights the positive and negative effects of the shadow economy. Among the positive ones, the most important are the following: the reduction of level of bankruptcies of the enterprises, the growth of incomes of certain segments of the population, the reduction of poverty level due to the decrease in the real number of unemployed. It is also worth noting that economic entities operating in the shadow economy have a greater capacity for flexibility, consequently they have a greater capacity for survival and are more resilient, even in times of crisis. It is also important that funds raised in the shadow economy can generate legitimate economic activity and help solve social problems.
It is found that the number and scale of the negative significantly outweighs the positive effects. Corruption has been identified and remains one of the biggest obstacles to reforming Ukraine’s economy. Usually Ukraine is ranked second in hundreds of countries in various international rankings on transparency of doing business, on protection of investor rights or on ease of doing business. This is also caused by the high level of shadow economy.
The shadowy activities in the financial and banking spheres consist of misuse of credit (loan) and illicit conversion of funds. Illegal issuance of bank securities, credit for neutralization of fiscal funds by falsification of financial data of enterprises or fraudulent bankruptcy are less common in the financial and banking systems.
Organizations operating in the shadow sector cause serious damage not only to the economy but also to the environment. In many countries, activities such as poaching and illegal logging are thriving.
It is revealed that the strategic priorities in the fight against the shadow economy at the present stage of economy are the following: to improve monetary policy, to use the modern financial instruments (for example, crowdfunding), to develop the digitization process, to stimulate investment processes, to create the favorable conditions for business development, to reduce and equalize the tax burden, to strengthen tax control in terms of production costs, to realize the effective management of the public sector, to strengthen the state oversight of the public funds, loans, and foreign investment, to combat laundering of proceeds of crime, and so on.

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