Taxation of transactions with securities and derivatives having signs of fictitious nature: problems and solutions

The article considers the problematic issues of the taxation of transactions with securities and derivatives having signs of fictitious nature. The author identifies various discrepancies between the provisions of the Tax Code of Ukraine establishing a special procedure for determining the financial results of individuals' transactions with securities and derivatives and the general principles of the taxation of securities transaction in the Code. Among them are: (i) the application of the above mentioned procedure to the full amount of costs incurred to acquire securities (derivatives), whereas restriction should only apply to incurred losses, (ii) unclear definition of the moment from which the procedure applies, when only period in which it operates is established, (iii) extending legislative restrictions only to individuals' transactions with securities and derivatives having signs of fictitious nature, while legal persons remain outside its application. The signs of fictitious nature of securities (derivatives) and signs of fictitious nature of the securities' issuers are examined from the point of view of their adequacy and sufficientness for the determination and authentication of the proper phenomenon. It is established that most signs of fictitious nature given in the regulation of the National Securities and Stock Market Commission are common attributes of the issuers of securities (derivatives) during financial crisis and it's rather doubtful to recognize securities (derivatives) as having signs of fictitious nature on that basis. The author proposes various changes to the current legislation on securities and taxation with the purpose of bringing relevant legal norms in accordance with the economic content of the phenomena and processes that they regulate.