TAXATION AS A FACTOR IN ECONOMIC INEQUALITY
DOI:
https://doi.org/10.56197/2786-5827/2024-3-4-5Keywords:
Taxation, Economic Inequality, Gini Index, Tax evasionAbstract
Introduction. Taxation is now seen not only as an instrument for generating income for state budget, but also as a regulation tool, as well as an instrument for achieving economic equality and stability within a country. That is why the impact of taxation on economic inequality had become such a popular topic. However, while the majority of authors cover the impact of taxation on economic inequality in the developed countries, the experience of developing countries often require local expertise to properly highlight. Thus, the aim of this study is to show the impact of taxation on economic inequality in Ukraine.
Materials and methods. In order to achieve the designated aims, the article was structured as follows: after the literature review there is an overview of currently available data including its sources. Unfortunately, the data available is found unfit for econometric modeling, and thus comparative analysis of Ukrainian tax rates against the tax rates of a selection of countries with similar Gini index was used, as well as the structure of tax income to state budget for 2018-2023 were used instead.
Results and discussion. Ukrainian tax rates appear to be generally lower than the EU average, although higher than in some of its neighboring countries. The majority of tax income comes from regressive taxes like value added tax, and Ukraine currently lacks progressive taxation of both personal income and corporate profit. Thus, Ukrainian tax system can be characterized as being regressive by design, i.e. taxing mostly the lower income brackets that receive official wages.
Conclusions. It can be reasonably concluded that prevalence of regressive taxes coupled with the majority of tax income stemming from regressive taxes results in Ukrainian tax system being a negative factor in economic inequality. The possibility of increasing taxation of the higher income brackets, however, is restricted by the ability of economic agents of that bracket to more effectively avoid taxes by changing their business activity jurisdiction. This leaves development of prevention mechanisms, including usage of modern technologies, as a promising direction of research.
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