TAX CHANGES AND THEIR IMPACT ON THE ACTIVITIES OF SMALL ENTERPRISES IN THE RESTAURANT SECTOR UNDER MARTIAL LAW CONDITIONS

Abstract

Taxes, which form the foundation of the state revenue system, play a crucial role in the functioning and efficiency of businesses, particularly in market economies with multiple forms of ownership. In Ukraine, constant changes in tax legislation have significantly affected the operations of small businesses, especially in the restaurant sector, creating both challenges and opportunities for adaptation. The outbreak of full-scale hostilities in February 2022 further exacerbated these difficulties, as enterprises faced reduced revenue, disrupted supply chains, and the need to finance national defense. Prior to the war, key obstacles to business development included an imperfect tax system, high tax rates, and instability in the implementation of tax policies. Since the start of the conflict, Ukrainian authorities have implemented a series of tax reforms aimed at supporting small businesses. These measures included temporary reductions in VAT and excise duties, exemptions from import taxes, moratoriums on inspections, simplified taxation schemes, and adjustments to social contributions and the military levy. The study examines the impact of these reforms on the financial stability of small enterprises, highlighting both the positive effects, such as temporary relief from tax burdens and administrative simplification, and the negative consequences, including increased financial pressure from higher military levies and the risk of expanding the informal economy. The article analyzes the dynamics of the restaurant sector during this period, noting that the combined effects of the COVID-19 pandemic and wartime conditions led to a significant reduction in operational enterprises and turnover. While temporary tax incentives enabled partial recovery, subsequent increases in tax burdens prompted closures of many individual entrepreneurs and intensified shadow economic activities. The study emphasizes that an effective tax system under crisis conditions must not only reduce tax rates but also optimize tax administration, enhance transparency, and create predictable legal frameworks. The findings highlight the critical importance of balancing fiscal policy with support for legal business activity, job preservation, and economic stability. Strengthening tax administration and ensuring transparent, stable rules are essential for maintaining the competitiveness of small businesses, restoring economic activity, and securing sustainable state revenue in conditions of ongoing martial law.