WAYS OF REDUCING THE TAX BURDEN IN UKRAINE
У статті проаналізовано рівень податкового навантаження в Україні та його структуру в розрізі окремих видів податків. Здійснено порівняння рівня податкового навантаження в Україні та країнах світу. Обґрунтовано шляхи зменшення рівня податкового навантаження в Україні.
Ключові слова: податкове навантаження, податки, податкова політика, система оподаткування, оцінка податкового навантаження, оптимізація податкового навантаження.
This article analyzes the tax burden in Ukraine and its structure in individual types of taxes. The comparison has been drawn between the tax burden in Ukraine and different countries of the world. This paper has substantiated the ways of reducing the tax burden in Ukraine.
Keywords: tax burden, taxes, tax policy, tax system, the tax burden estimation, optimization of the tax burden.
Formulation of the problem. The tax system has a significant impact on the stability of the financial condition of business entities. The tax burden defines the conditions of financial and economic development of the country, and it is formed by a set of all tax payments to a state and local budget. The inefficient mechanism of the Ukrainian tax system, excessive tax burden, and lack of stable legislation provoke distrust of business entities and lead to the growth of the shadow economy and low economic development. Therefore, one of the most pressing problems today is to determine the optimal level of tax burden in order to ensure sufficient and stable revenues to the budget and to promote business development as a prerequisite for economic development.
Analysis of recent research and publications. The problems of the tax burden and its impact on the financial condition of business entities were investigated by such foreign scholars as K.Brauer, P. Hansel, P. Mikeladze, E. Seligman, A. Sokolov, K. Shmelov. Likewise, the theoretical aspects of the tax burden were scrutinized in the works of such modern national scientists as V. Andrushchenko, G. Vasylevska, A.Krysovatyi, T. Marshalok, P. Melnyk, A. Podderogin, V. Polishchuk, N. Rysova, A. Sokolovska, G. Fylyuk, A. Fradynskyi and others. The authors emphasize theoretical basis of the tax system reformation. More attention needs to be given both to the comparison of tax burden in Ukraine and other countries and justification for its reduction.
The aim of this study is to substantiate tax burden-reducing measure in Ukraine on the basis of the concept “tax burden” and the assessment of its level in the Ukrainian economy.
Summary of the basic material. Despite current reforms, the current Ukrainian tax system is still not perfect. Because of the fact that tax on real economy is estimated as too high, the investment climate in Ukraine is considered to be inauspicious. Enterprises can work cost-effectively only when they hide their income. Thus, the problem of shadow economy appears in the country.
The main task of the Ukrainian tax system reforms in 2015 was tax burden reduction, tax system simplification, and increased budget profitability [4, p. 215].
Modern economics interpret the definition of tax burden in different ways. At the micro level, term “under the tax burden” is understood as the total amount of all taxes, fees, and other mandatory payments in terms of value which the economic agents are obliged to pay to the budgets at all levels in accordance with current tax law. In the macroeconomic scale, tax burden is defined as the effectiveness of tax policy, in other words, it is the cumulative effect of tax payments on payments sources [2, p. 23].
O. Godovanets and T. Marshalok claim that tax burden is an indicator of the effectiveness of government interference through taxes in the activities of taxpayers [2, p. 86].
A. Sokolovska asserts that the tax burden is the effect of taxes on the economy in general and on the individual taxpayers connected with economic limitation resulting from discharge of tax of taxes and misuse of these funds [6, p. 80].
O. Fradynskyi defines the tax burden as the ratio of tax revenues to the consolidated state budget to the gross domestic product. For a more complete representation of fiscal pressure on taxpayers, the formula is proposed:
where TB – tax burden; ATR – the actual tax revenue; GDP – gross domestic product.
Accoding to G. Fylyuk, the tax burden is a generalized indicator that characterizes the value of tax exemptions on the macro (state) or micro (economic agent) levels [4, p. 215].
G. Wasylewska claims that the tax burden is a measure, degree and the level of economic constraints arising from allocations and misuse of tax payment funds [5, с. 8].
The issue about the optimal level of tax burden has always been of paramount importance. For example, in the late twentieth century, A. Laffer, an American economist, noted that exemption limit in the budget is 30% of income, and 40-50% of removal of income reduces savings of people lead to a lack of interest in investing and therefore lower tax revenues. According to this concept, the revenue grows both when the number of taxpayers increases and the tax base broadens, but not by means of tax rates increase [2, p. 87].
In Ukraine, there is an ongoing debate about an optimal and effective level of taxation, which would provide the budget with sufficient revenue and thus stimulate the development of the manufacturing sector. However, different countries have different optimal tax burdens due to a different level of socio-economic development and different degree of efficiency of financial policies.
The tax burden rate, in international practice, is defined as the ratio of tax revenues to the consolidated state budget to the gross domestic product. According to this method and the formula suggested by A. Fradynskoho, the level of tax burden in Ukraine for 2012-2014 was determined (Table. 1) [1; 3].
While analyzing the dynamics of the tax burden in Ukraine, it is worth noting that in 2013 this index decreased to 1.51% and to 0.7% in 2014. As a result, in 2014, it was equal to 23.46%. Such changes occurred because GDP increased faster than tax revenues. Thus, in 2013, GDP grew by 4.31%, while tax revenues fell by 1.83%, and in 2014 GDP grew by 6.93% and tax revenues fell only by 3.83%.
The most effective way both to reduce the tax burden in Ukraine and to ensure sufficient amount of tax revenues in the budget is to redistribute the tax burden among subjects and objects of taxation. In order to assess the tax burden objectively, it is necessary to analyze its redistribution upon objects of taxation by determining the structure of the tax burden through the main types of tax payments (pic 1) .
Fig. 1. Structure of tax revenue in Ukraine in 2012-2014, %
Taking everything into consideration, value added tax, income tax and corporate income tax played a major role in the formation of the tax burden in Ukraine during the 2012-2014. These mandatory payments formed 84.3% of tax revenues in 2014. The most crucial taxes, which accounted for almost 75% in the structure of the tax burden, were the value added tax and the income tax. It means that the tax burden in Ukraine is formed mainly by its population.
Most other countries in the world try to moderate the tax burden, direct the tax policy at ensuring sustainable economic growth, and create a favorable environment for economic activity and social welfare. However, many leading countries that manage to deal with all these issues, have primary indicator of the tax burden. Having analyzed data on tax burden in countries with different levels of economic development, we can compare the index that we have in Ukraine with that in other countries (tab. 2) .
According to these figures, countries with a developed economy have the highest proportion of taxes to GDP. For example, in France the tax burden is 44.6%. Middeveloped countries with transition economy also have the high level of tax burden – from 30 to 37%. This tendency is a result of a rational and efficient system of distribution and use of funds. Ex-socialist countries with transition economy, to which Ukraine belongs, have a lower level of tax burden, and are characterized by higher level of tax burden compared to other countries. Developing countries have the lowest level of tax burden, and it is the main reason of a lack of funds in their budgets.
The tax burden in Ukraine and in the world as of 2014
Therefore, one of the prerequisites to pull Ukraine out of economic crisis is to introduce at least a slight reduction in the tax burden. In this way, Ukraine will get a sustainable development in economic and fiscal areas. Moreover, the gradual reduction of the tax burden on individuals will increase household savings and have a positive effect on demand. As a result, these changes will lead to the development in production and the increase in real income, then to the increase of tax base [5, p. 8].
However, one of the most important prerequisites for improving the economic situation in the country is to reform the tax system, find the ways to efficient allocation and use of tax revenues. The tax system in Ukraine was simplified due to the tax system reform in 2015 as a result of reducing the number of mandatory payments, merging several taxes, or their cancellation. The rates of some taxes were reduced accordingly. The main objective of tax reform should be a transition from a fiscal tax policy direction to activate regulatory capacity. Regulated tax law will likely stimulate programs of socio-economic development. On the other side, effective legislation should ensure stable, clear, and transparent rules of taxation that will contribute to growth in businesses and increase in investment, which are the driving forces of the economy.
The amount of time spent on taxes and fees has an impact on the effectiveness of the tax system. According to statistics, an average 657 hours per year in our country is spent on discharge of tax and fees [2, p. 87]. Obviously, the tax system in Ukraine is not perfect and has many problems. The level of tax burden in Ukraine is high, compared with countries that have similar levels of economic development, and poses a threat to economic security. Ukraine has great need to work not only on reducing the tax burden but also on the overall efficiency of the tax system. In order solve these problems, the following can be offered:
– slight and gradual reduction of tax rates;
– broadening of the tax base;
– application of progressive taxation;
– creation of a transparent system of taxes and fees;
– even distribution of the tax burden between taxpayers on the basis of their type of activity;
– improvement of the tax control system to prevent tax evasion;
– creation of a fair tax system by reducing and effective use of tax incentives;
– attraction of investment and innovation in the priority sectors for expanding the business and increasing revenue for economic agent that will lead to an increase of GDP and reduction of the tax burden.
These legislative enactments will help to ensure the growth of tax revenue, solve the problems connected with the shadow economy and tax violations, and revive business activity.
Conclusion. The current tax system in Ukraine has many shortcomings. Some new regulations have already been imposed, but experts are still concerned about the high tax burden in Ukraine. Having analyzed the tax burden in Ukraine, we should admit that a slight reduction of the tax burden did not bring about positive results. Moreover, after comparing this index with that in other countries, it becomes obvious that in Ukraine the level of tax burden is higher than in countries with similar levels of economic development. Such problems as shadow economy, evasion of taxes, prevention from the economic development, and worsening of investment climate still remain to be unsolved. These problems can be tackled by reducing the level of tax burden through the improvement of functioning of the national tax system. Shortfalls in budget revenues can be offset by both broadening the tax base and the use of progressive taxation. The priority should be given to attracting investment, which will increase the income of economic agents and stimulate economic development.
1. Vykonania derzhavnoho biudzhetu [Electronic resource]. – Mode of access : http://www.treasury.gov.ua/main/uk/doccatalog/list?currDir=14647
2. Hodovanets O., Marshalok T. Podatkove navantazhenia: vazhlyvyi chynnyk sotsialno-ekonomichnoi stratehii derzhavy / О. Hodovanets, Т. Marshalok // Ekomichnyi analiz. − 2010. − № 3 (19). − S. 85–89.
3. Derzhavna sluzhba statystyky Ukrainy [Electronic resource]. – Mode of access : http://www.ukrstat.gov.ua
4. Dropa Ya., Chaban I. Podatkove navantazhennia ta yoho vplyv na ekonomiku Ukrainy / Ya. Dropa, І. Chaban // Formuvannia rynkovoi ekonomiky v Ukraini. − 2012. − № 219. − S. 213–218.
5. Sokolovska А. Teoretychni zasady vuznachennia podatkovoho navantazhennia ta rivnia opodatkuvannia ekonomiky / А. Sokolovska // Ekonomika Ukainy. − 2010. − № 7. − S. 4–12.
6. Fradynskyi О. А. Poniattia podatkovoho navantazhennia ta pidhody do yoho vyznachennia / О. А. Fradynskyi // Visnyk Hmelnytckoho natsionalnoho universytetu. − 2013. − № 1. – Т. 1. − S. 79–82.
7. List of countries by tax revenue as percentage of GDP [Electronic resource]. – Mode of access : http://www.oecd.org/newsroom/taxrevenuesfallinoecdcountries.htm