REFORMING THE CORPORATE INCOME TAX IN THE CONTEXT OF ENSURING THE SUSTAINABILITY OF PUBLIC FINANCES

Abstract

To ensure the long-term sustainability of Ukraine’s public finances under conditions of a high level of public debt and significant payouts for its servicing, formation of prerequisites for economic growth and tax revenues of the state is required. The problem aspects of the corporate income tax in Ukraine are researched. Attention is focused on shortcomings of legal regulations of the tax base definition, which resulted in a significant reduction of budget revenues from corporate income tax, as well as their share in the total amount of revenues and mandatory payments of the general government sector (the state tax revenues) in 2014–2017. Based on the results of generalization of Estonia’s experience on use of the tax on withdrawn capital under conditions of Ukraine (when not the tax rates, but corruption and ineffective bureaucracy hinder economic growth), the authors conclude that the introduction of this tax is inexpedient. After all, the main consequence of such a reform of the corporate income tax will be growth of the budget deficit and public debt. According to the international experience, processes of reducing the corporate income tax accompany the unification of norms to form the corporate income tax base to prevent abuses and improve the efficiency of financial control. It is determined that the necessary prerequisites to ensure the sustainability of public finances in Ukraine are: (i) to counteract the evasion from payment of corporate income tax by establishing the legislative restrictions on the recording of expenses when determining the tax base for all taxpayers, and (ii) to simultaneously introduce tax incentives for research, development and innovation-investment activities of enterprises.