Tax evasion of small and medium-sized businesses: peculiarities of schemes in the EU and projection on Ukraine

Abstract

Introduction. In current European economic system, small and medium-sized enterprises (hereinafter-SMEs) are the main source of added value (approximately 50% and 60%) and are crucial for strengthening inclusive globalization and economic growth. In developing economies, SMEs provide almost 45% of total employment, 33% of their GDP, and together with the contribution of shadow businesses, SME generate more than half of employment and GDP regardless of their income. However, one of the negative manifestations of SME activity is their participation in tax evasion schemes. Problem Statement. Determination of theoretical aspects of tax evasion, motivational prerequisites, reasons for tax evasion and forms of tax minimization in the field of small business; ranking of typical SME tax avoidance schemes in different EU countries; systematization of classic and modern forms of tax evasion in the SME sphere; analysis of sectoral features of the application of the SME tax evasion scheme through the use of fictitious employment (BSE); determination of directions for combating tax evasion in global and domestic fiscal practice. Purpose. The purpose is to study the peculiarities of tax evasion in the EU at the level of small and medium-sized enterprises, systematize and rank the most common tax evasion/optimization schemes, conduct a comparative analysis of such trends with Ukrainian practice, and develop proposals for countering tax deviations. Methods. In the research process, general scientific and special methods are used: description, analysis, synthesis, grouping, comparison, abstract-logical method and the method of theoretical generalization. Results. It is determined that the reasons for tax evasion in the SME sector often stem from psychological, mental, historical events, comparisons with other enterprises, the market situation and the approach of the company owner. It has been found that the experience of EU countries shows that SME taxation typically involves adjustments to the traditional tax technology of income taxation from entrepreneurial activity by providing certain preferences, in particular tax discounts, deductions from income, etc., as well as the application of progression in the taxation of such income. Classic and new SME tax evasion/optimization schemes exist, including the active use of BSE (bogus employment). The practical aspects of combating tax evasion/optimization in the EU through the implementation of BEPS (Base Erosion and Profit Shifting) and GAAR (General Anti-Avoidance Rules) are described. It is proved that GAAR is a concept that allows the state to deny the right of a taxpayer to receive tax benefits (advantages) from a certain transaction (series of transactions), if such transaction (series of transactions) has no other objective economic purpose than obtaining such benefits and advantages. The projection of EU tax legislation in the field of combating tax evasion in strategic domestic documents is outlined. Conclusions. Full implementation of the GAAR rule in the EU and Ukraine will significantly counteract both classic and new tax evasion/optimization schemes, including in the field of SME operation. An important component of reforming the simplified taxation system in Ukraine is establishing a transition (adaptation) period, especially in connection with the difficult situation caused by the pandemic and war.