DETERMINANTS OF SMALL BUSINESS TAXATION IN UKRAINE

Abstract

The article examines the taxation policy of small businesses in Ukraine in 2025, a period marked by mili-tary risks, structural changes, and financial instability. Small businesses in this context act not merely as economic agents but as crucial shock absorbers of socio-economic turbulence: they preserve employment, support local markets, sustain community resilience, and ensure the continuity of regional economic development, effectively serving as key drivers of local and national growth. Tax policy emerges as not only a fiscal instrument but also a strategic regulator of entrepreneurial behavior, determining who survives, who expands, and who is forced to operate informally or cease operations entirely. The study analyzes the main taxation regimes for small businesses, including both the general and simplified systems, as well as the special status of self-employed individuals. It identifies “tax traps” embedded in the structure of mandatory payments, including social contributions, military levies, and local fees, which influence the choice of legal form, scale of operations, and financial strategies. Fixed payments reduce system flexibility, increase incentives for informal activity, and push entrepreneurs toward optimization strategies, occasionally limiting growth potential and constraining innovative business practices. Particular attention is paid to the interaction between tax policy and financial sustainability, its impact on employment dynamics, job creation, and local economic development. The research demonstrates that an effective taxation model should balance fiscal sufficiency with entrepreneurial stimulation, ensuring transparency, predictability, and adaptability to economic changes. The article proposes a flexi-ble taxation framework capable of supporting small businesses in the post-war period, securing stability and growth, encouraging innovation, and fostering a competitive, innovative, and resilient entrepreneurial ecosystem at various levels of the economy, from local communities to national markets.