Sometimes they shut down: Ukraine sets a record for the closure of private businesses.
In 2024, Ukraine recorded a five-year high in the closure of private entrepreneurs.
The analytical platform YouControl presented an infographic based on open data. However, let’s focus not just on what is stated in it, but on what remains behind the dry figures. I will speak candidly, without sugarcoating.
So, in 2024, 210,000 individuals filed for closure of their business activities. This is undoubtedly a record. However, it is fair to immediately note that more businesses were opened — nearly 285,000. The devil is always in the details.
Gender issue.
Closures are predominantly initiated by men — 51% of all applications, while openings are primarily by women — 61%. There are several reasons for this distribution. Naturally, the main reason is the reluctance to speak openly during a telethon. Men fear state sanctions for evading mobilization.
The government has done so much for the digitalization of mobilization that it has created a fear of being under scrutiny. It all started with the adoption of a new mobilization law, and from every corner, “experts” were proclaiming how property would soon be confiscated and accounts blocked for failing to appear at the enlistment office. It was during this time that there was a spike in the number of men leaving the country by any means possible. It was also when there was an abnormal increase in notarized property donation agreements. Additionally, the number of women vehicle owners rose. Men were transferring their assets to their close female relatives. A sole proprietorship (FOP) cannot be transferred, so they were closed instead.
The second reason, which I observed throughout the year among my clients who left for abroad, was the final decision to sever ties. You see, they had left, but were still conducting financial operations through their Ukrainian FOP. This was, if you will, a lifeline connecting them to their homeland. However, news of account blocks and refusals to renew passports through consulates coincided with them often being labeled as evaders in news reports. Well, an evader for their homeland is a treasure for another country's budget.
Before my eyes, there was a moral shift: from thoughts of ever returning to decisive action regarding full legalization abroad. It doesn’t matter that the tax in Ukraine is only 5%. There were two waves of making a fateful decision: the first — at the beginning of 2024 (Mobilization Law), and the second — in the last quarter (Tax Increase Law and the cessation of military period benefits). Here, I must preempt comments (though you will write them anyway), the issue was not merely that the tax was raised by 1% and the Unified Social Tax (ESV) was now mandatory. For people in a state of moral choice, this tax increase decision was the last straw.
An important detail — donations from Ukrainians abroad have also decreased. As one of my interlocutors told me, "If the government has given up on me, then I will give up on it too."
The third reason. The number of closed IT FOPs increased by 29% compared to the previous year and was twice as much as in 2021. Foreign companies are reluctant to initiate new contracts in Ukraine. For them, the risks are simply too high that agreements will be disrupted due to employee mobilization. Or is it a secret that the overwhelming majority of IT specialists are men? Consequently, there is an unpublicized mass relocation of IT professionals across the state border. Their former Ukrainian employers spent all of 2023 opening offices in European countries. In 2024, they gradually relocated key employees. Disclaimer — I don’t know the methods, addresses, or passwords. We all have a rough idea of how this was done.
I don’t want to introduce a caveat about the necessity of mobilization, and in our current dominant mode of communication, it will be endless, but still. The absence of predictable rules of the game has created a situation of strategic uncertainty, pushing people to minimize their points of contact with the government. It is precisely the lack of an algorithm leading to precise results. In practice, trusting the government’s guidelines, people most often received only burdensome obligations.
For a complete analysis, we need to consider the rise of new FOPs and their "female" character. All employers are required to report their staff to the mobilization centers. Therefore, companies often resort to the trick of registering employees as private entrepreneurs rather than as staff. This way, they don’t need to submit reports.
Western donors are allocating large grants aimed primarily at women, including encouraging them to start their own businesses. Agree that it’s more appealing to start a business when part of the equipment is already paid for.
Everyone thinks that business is primarily about money. But in reality, business is primarily about risk management. Here we have a painting in oil.
The author expresses a personal opinion that may not coincide with the position of the editorial board. The author is responsible for the published data in the "Opinions" section.