TAXATION AND PENALTIES IN THE FIELD OF LABOR: INSTRUMENTS FOR BUSINESS DE-SHADOWING IN UKRAINE AND INTERNATIONAL EXPERIENCE

Abstract

The article examines the system of taxation and penalties in the field of labor as a comprehensive instrument for business de-shadowing in Ukraine under conditions of economic instability and martial law. It substantiates that the effectiveness of labor relations legalization is directly related to the level of fiscal discipline, transparency of tax administration, and the inevitability of employers’ financial liability. The regulatory and legal framework governing the imposition of fines for violations of labor legislation is analyzed, in particular the mechanism of linking penalties to the minimum wage, the differentiation of sanctions depending on the nature and recurrence of offenses, as well as the application of mitigating coefficients for small and medium-sized enterprises. Special attention is paid to the practical aspects of de-shadowing the restaurant business as a sector with increased risks of revenue understatement, incomplete fiscalization of transactions, and the use of undeclared labor. The results of inspection and control activities are analyzed, and a cause-and-effect relationship between tax minimization practices and losses of budget revenues is identified. It is determined that the indexation of fines through their linkage to the minimum wage strengthens their preventive effect; however, it does not eliminate the need to improve administrative mechanisms and interagency coordination. A comparative analysis of international experience in the application of financial sanctions in the countries of the European Union and North America is conducted. It is established that in most developed countries penalty mechanisms are combined with risk-based inspection approaches, digitalization of control procedures, and strict liability measures for systematic violations. The effectiveness of de-shadowing depends not only on the amount of financial sanctions but also on the consistency of state policy, the institutional capacity of supervisory authorities, and the formation of a culture of voluntary compliance with legislation. The prospects for Ukraine include the implementation of a comprehensive de-shadowing model that combines the digitalization of tax administration, enhanced analytical risk management, institutional cooperation among regulatory bodies, and the promotion of voluntary compliance with labor and tax legislation.