Abstract
Purpose: To determine the impact of changes in tax burden in Ukraine on the country’s economic freedom. Methodology: The study applies qualitative methods for historical analysis, periodization of reforms, and classification of their key priorities and influences. Quantitative methods are applied to compare tax burden (tax-to-GDP ratio) in Ukraine and OECD countries. The overall success and failure of tax reforms was measured by the index of economic freedom, including its component, the index of tax burden (fiscal freedom). The first hypothesis suggested that a reduction in tax burden positively impacted the level of economic freedom in Ukraine; the second hypothesis stated that a reduction in tax burden positively affected the fiscal freedom of Ukraine. Regressions in average tax burden and the index of economic freedom, including the index of tax burden, were built in R software. Findings: Regression analysis did not confirm the first hypothesis. The second hypothesis was confirmed. Reduced tax burden does not affect the level of economic freedom of Ukraine. This is explained by the slow progress of institutional reforms in Ukraine. The reduction of tax burden has a significant positive impact on the level of fiscal freedom. Practical Implications: The results obtained have practical relevance for the elaboration of fiscal policies in developing countries, in accordance with the country’s economic and political development priorities. Research Limitations/Implications: Future research will include a more in-depth comparative analysis of tax reforms in Ukraine, focusing on the key taxes.
Highlights
After gaining independence, Ukraine launched a series of tax reforms
An important part of these reforms was the reduction of tax burden, which was initially seen as a way to enhance economic growth and, at later stages, to curb the shadow economy present in the country
We propose the following hypotheses: H1: The reduced tax burden in Ukraine has a positive impact on the level of economic freedom of Ukraine
Summary
Ukraine launched a series of tax reforms. The reforms involved changes in the number of taxes and structure of the tax system, base, rates, administration, and other elements. In Ukraine, scarcely a year has passed without some form of change in the tax law or other related fields. This lack of stability triggered a public discussion about the need to freeze tax reform since it was hard for businesses to keep up with the changes. In light of the above, questions arise as to how adequate the goals and priorities of the Ukrainian tax reforms were, whether they were really needed, whose interests they served, how efficient they were, and what determined the change of priorities during reforms
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