PROBLEMS AND PRINCIPLES OF OPTIMIZING THE SOCIO-ECONOMIC EFFECT OF THE PERSONAL INCOME TAX IN UKRAINE

Abstract

Abstract. This article is devoted to estimating and explaining the extent of social priority implementation in fiscal policy in Ukraine and defining the reserves, caused by placing the personal income tax in Ukrainian tax system, which would be used to improve taxing impact on social welfare. The comparative analysis was used as key method for estimate the actual tax pressure level and its structure deviation from desired, based on OECD countries experience, indicators of aggregate tax burden on economy and its structure. Based on the results conducted comparative analysis, the vision of the disadvantages, inherent to Ukrainian current tax system was defined. First, a rather high level of tax pressure (Ukraine is positioned above the trend line expressing dependence «GDP per capita — the share of taxes in GDP»), our country combines with the unfavorable tax structure to ensure the «targeting» of the tax burden distribution. As a result, the governability of the tax pressure distribution is reduced and the government loses the ability to implement social priorities in fiscal regulation. Second, there are two parameters, which are the determining factors for the distribution of tax burdens between groups of taxpayers on personal income in Ukraine: the minimum amount of non-taxable income and the absence of rising tax rates for incomes far higher than average in economy. Their effect causes that even income in the size of the subsistence minimum is liable for significant taxation, but for income much higher average size tax burden remains very low compared to European countries. In Ukraine, to compensate for the underutilization of the fiscal potential of high-income recipients, the tax burden is shifted to broad sections of wage earners in the formal sector of the economy (who have minimal opportunities to evade income tax and social security contributions). This, in turn, exacerbates the negative impact of taxation on the growth rate of wages and the conditions for the reproduction of economic activity of the general population. We tend to consider the only possible means to overcome these two disadvantage of Ukrainian tax system is to increase the differentiation of tax pressure (in particular, by introducing additional differentiation of income tax rates for various taxpayers groups), which should ensure that the actual tax pressure is brought into line with the solvency (fiscal potential) of taxpayers. Keywords: tax system, personal income taxing, tax burden, tax incidence, progressive taxation. Formulas: 0; fig.: 2; tabl.: 2; bibl.: 17.