TAXATION OF LABOR INCOME AT THE START OF A CAREER:
STUDENT EMPLOYMENT AS AN EARLY INDICATOR OF THE FISCAL GAP

Vіtalii PYSMENNYI

Ternopil Ivan Puluj National Technical University, Ternopil

https://orcid.org/0000-0001-7852-3627

DOI: http://doi.org/10.34025/2310-8185-2026-1.101.06

Keywords: labor income taxation, personal income tax, military duty, unified social contribution, fiscal gap, student employment, shadow labor market.

Summary

Against the backdrop of labor market transformation and intensifying fiscal pressure in Ukraine, the taxation system continues to overlook age-based differentiation among taxpayers, treating student youth as a universal taxable subject. This creates an institutional asymmetry where young people bear full fiscal responsibility at the start of their careers without immediate social benefits, thereby incentivizing entry into the informal sector. The war has exacerbated these imbalances, shifting student informal employment from a sociological phenomenon into a macroeconomic factor contributing to a systemic fiscal gap.

Objective. The article aims to analyze the specifics of taxing student labor income in Ukraine, determine its role in forming the fiscal gap amidst widespread informal employment, and substantiate proposals for adapting tax instruments to the specificities of student labor.

The study employs a comprehensive approach integrating: an assessment of survey results regarding student employment to determine behavioral elasticity parameters toward tax incentives; an analysis of revenue trends from personal income tax, military duty, and unified social contribution to reconstruct macro-fiscal trajectories under martial law; and the development of a conceptual framework for implementing special tax regimes and employer incentives aimed at the institutional legalization of first-time employment.

The study identifies a predominance of informal and semi-formal employment models among students, indicating a profound distortion of the youth labor market segment. It is demonstrated that the current tax architecture acts as a «selective filter» which, through unified fiscal burdens, creates high barriers to entry into the legal framework, pushing youth into the «shadow» sector. The hypothesis is substantiated that early experience in informal labor transforms student employment into an incubator for persistent «shadow» practices that scale into later career stages, forming destructive fiscal behavior patterns and systemic risks to national financial stability.

The study justifies the introduction of a special tax regime, including a reduction in personal income tax rates for youth and exempting employers from unified social contribution payments when hiring students within their field of study. The institutionalization of a digital «student-entrepreneur» status within the «Diia» ecosystem is proposed to automate compliance and reduce transactional costs.

Future scientific inquiries should focus on modeling the fiscal gap formed during the early stages of professional life, isolating student employment as a distinct analytical segment.

Biographies of authors:

Vіtalii PYSMENNYI,

Ternopil Ivan Puluj National Technical University

Doctor of Economic Sciences, Associate Professor,

Professor of the Department of Economics and Finance

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