ECONOMIC-LEGAL AND SOCIAL-LEGAL MECHANISMS OF DETINIZATION THE ECONOMY: OPPORTUNITIES AND LIMITATIONS

Abstract

The shadow economy is a multifaceted phenomenon that significantly impacts economic stability, public finances, and social justice. This article analyzes the key factors shaping the shadow sector in Ukraine, including economic crises, war, digitalization, institutional efficiency, and social aspects. Based on reliable sources, the study identifies major trends in the dynamics of the shadow economy, its regional characteristics, and structural features. Particular attention is given to the analysis of data on the illicit tobacco market, which showed a significant reduction in 2024 compared to previous years. The primary components of the shadow market include counterfeit products (8.1%), smuggling (5.1%), and Duty Free-labeled goods (1.4%). Regional analysis highlights the highest concentration of shadow economic activity in the Dnipropetrovsk, Kharkiv, Odesa, and Kyiv regions, influenced by geographic and economic factors. A comparison with international practices, particularly in the Baltic countries and the MENA region, reveals both commonalities and unique aspects of Ukraine’s shadow economy. The war has become not only a challenge but also a condition that temporarily reduced the shadow sector due to strengthened oversight, increased external financial aid, and reduced consumer purchasing power. However, despite positive trends, long-term reduction of the shadow economy requires comprehensive reforms, including simplifying the tax system, expanding digitalization, and increasing trust in state institutions. The conclusions emphasize the importance of a systematic approach to economic legalization, which should include both governmental initiatives and public engagement in formal economic activities. Recommendations are provided to strengthen financial stability and promote economic growth in Ukraine based on national and international practices.