Economic Mechanisms for Preventing Tax Evasion and Financial Crimes: Cross-Country Evidence

Abstract

This study explores the development and implementation of economic mechanisms designed to prevent financial crimes within the tax system, specifically focusing on the challenges faced by Ukraine as a transitional economy. Financial sustainability in emerging markets is fundamentally tied to the integrity of tax administration; systemic tax evasion and financial crimes create fiscal deficits that undermine structural reforms. Using a multi-disciplinary approach, this paper analyses the effectiveness of current preventive measures against international benchmarks established by the OECD and the European Union. The research identifies critical structural vulnerabilities in the current tax system and proposes a modernized framework of "Economic Mechanisms" that includes digital transparency, risk-based auditing, and international information exchange protocols. The findings suggest that transitioning from reactive legal enforcement to proactive economic prevention significantly reduces the "tax gap" and enhances the state's fiscal resilience, safeguarding tax revenues, these mechanisms provide the necessary financial stability to support broader structural reforms and long-term economic growth. The study offers practical recommendations for policymakers to align national tax enforcement with global standards, ensuring corporate and state financial sustainability in volatile transitional environments.