Public finance capacity to secure expenditures during the war period and the post -war recovery of Ukraine

Abstract

Introduction . The armed aggression of the Russian Federation causes huge humanitarian and economic losses to Ukraine, severs urgent problems of covering budget expenditures due to the rapid growth of security and defence costs. Problem Statement. During the period of martial law, the budget of Ukraine needs significant amounts of international financial support and the involvement of the NBU in purchasing military bonds following a significant drop in the main source of public receipts - tax revenues. Purpose. The goal is to generalize the international experience of solving fiscal problems in post-conflict and crisis conditions and to develop recommendations on the implementation of the existing of public finances capacity to secure expenditures of the war period and the post -war recovery of Ukraine. Methods. The methods of systemic and historical-logical analysis, structural-functional analysis, statistical comparisons, graphic representation are applied. Results. According to the results of the analysis of the fiscal system of Ukraine during the war period, a significant decrease of tax revenue contribution to the financing of public expenditures was revealed - in March-June 2022 taxes covered only 39.1% of expenditures of the consolidated budget of Ukraine, while in January-June 2021 - 80.3%. It has been determined that the solution to the problems of financing the urgent budget needs of the war period requires the enhancement of efforts for tax revenue generation. It has been proven that in Ukraine, a one-time (special) voluntary tax declaration of assets by individuals, as well as reduction of corporate income tax rate and social security contribution rate did not yield the expected outcomes - income unshadowing, growth of investments and public revenues. The foreign experience of gaining additional budget revenues in periods of crisis was studied. Conclusions. Proposals regarding the fulfilment of the existing tax capacity of Ukraine in order to secure expenditures of the war period and the post-war recovery of Ukraine are substantiated, in particular by identifying “gaps” in compliance with tax law regulations (tax gaps); return of pre-war terms of taxation; extensive use of information from third parties, including from abroad, to prevent tax evasion; the increase of taxes on the income and property of wealthy taxpayers in crisis situations.