A reliable back line: the tax figures by retailers and the number of employed Ukrainians over the year of war

Over 12 months of last year, the leading retailers paid almost UAH 57 billion in taxes providing job places for over 304,000 employees.

The blood of economics

Before the war, retail belonged to top 5 largest Ukrainian profit-makers. However, after the beginning of full-scale hostilities on February 24, the situation changed dramatically. Over the first month of hostilities, about one third of trade venues/stores were closed for different reasons. Although retail is gradually regaining power, the dynamics does not correspond to income recovery compared to pre-war times.

Despite that, this domain remains one of the main budget sources. The majority of taxes distributed to budgets of all levels is attributed to VAT, individual income tax, and excise tax. That is, the consumption and labor payment taxes.

The recent poll conducted by the Retail Association of Ukraine (RAU) among 57 network members which held 10,016 trade venues before the active hostilities revealed that in 2022, the amount of tax payments to budgets of all levels affected by nine retail domains totaled UAH 56.6 billion.

The largest share of this amount is attributed to food retail, which is not a surprise, since the consumption of the essential commodities is prioritized by the population. Food retail is a great example of a sustainable social business which actually became a stronghold of the country’s food safety.

For example, in 2022, ATB corporation alone paid UAH 20.44 billion in taxes and duties. According to the company, in 2022, it paid UAH 13.65 billion to the state budget, UAH 4.32 to the local budgets, and UAH 2.47 to target funds. The total amount of taxes and duties paid by ATB exceeds the indicators of the last year by almost a billion hryvnias (UAH 19.45 billion). A year before that, the figure totaled UAH 15.8 billion.

Fuel sales take the second place. Generally, the poll covered the companies from the following food and non-food retail sectors: drugstore networks, car fueling stations, jewellery stores, fashion stores, electronics and household appliances stores, building materials stores, and entertaining centers.

Employment

Retail trade is also one of the largest employers in Ukraine. Retailers are a source of income for hundreds of thousands of employees and millions of their family members. It suffices to say that only 57 companies participating in the RAU research alone had 304,482 employees in their networks as of the end of December 2022. Hence, scaled to the entire state, the figure is much higher.

Considering that during wartime a lot of able-bodied Ukrainians became unemployed, the working family member often became the sole breadwinner. “The hostilities are waged at the territories previously employing 10 million people. At least 5 million of people lost their jobs,” informed Deputy Economics Minister Tetiana Berezhna at the end of November 2022.

Thus, it is really important to involve as many people as possible in the country’s economy to work for the common victory over the enemy. Apart from direct losses of the retail from the hostilities, one should also take into account lower consumption, for a large share of potential buyers went abroad and those staying began sparing. Correspondingly, the sales tax proceeds also decline.

Retailers try to restore their staff where possible, for later, it would become much more difficult to find or train a valuable expert. For instance, a similar research conducted by the RAU last May indicated that only 9 % out of 50 companies (the list is slightly different now, so comparing the two sets of data is not quite correct) applied downsizing compared to the end of 2021. At that, a quarter of trade outlets of the networks was destroyed, became temporarily occupied, or closed due to various reasons.

However, the retailers find it hard to maintain their businesses and staff. Constant unexpected challenges like blackouts make the networks spend additional money to continue the stable work or provide the population with the basic goods.

Thus, it is very important for the state to support the retail, for in our case, it may lead to decline in tax proceeds and result in the reduction of the number of employees in the sector, growing unemployment, and loss of income source for hundreds of thousands of families.

As more stores are open, the staff numbers will also gradually grow. Among other things, it is especially important at the deoccupied territories. Hence, the retail tax proceeds will also grow on account of individual income tax. After the victory, one should expect an organic labor market growth accompanied by accelerated business activity and the GDP in the state in the least. According to the analytics manager of rabota.ua Ivan Romashov, before the russian armed aggression, the forecast annual labor market growth totaled 1.3 to 2.4 %