A comparative analysis of the factors of tax evasion in Ukraine and USA

The purpose of the article is to reveal effects on the individual's tax compliance, to examine weak points of tax legislation of Ukraine that may induce tax evasion, and to develop recommendations for the improvement of Ukraine's tax system in terms of minimization of tax evasion, in particular, by introducing comprehensive tax reporting. The article presents the findings of various theoretical and empiric investigations by leading domestic and foreign experts on the issues of estimation and detection of tax evasion. Generalization of the basic factors predetermining is based on the conclusions of the theory of subjective expected utility, institutional theory, as well as the results of analysis of a simple static model. Considerable attention is given to the analysis of tax evasion effects on the economic growth as long as it dis-torts tax burden distribution and income redistribution, and aggravates imperfect competition. Advantages of comprehensive tax reporting are justified in terms of the facilitation of the detection of tax evasion and counteraction to its emergence in the future. Based on USA experience, it is stated that the efficiency of this measure increases with certain incentives (such as tax abatements, credits, tax deductions and other tax allowances), which encourage voluntary reporting of the tax payers. However, according to the analysis of domestic tax legislation, such incentives are almost absent in Ukraine, and tax deductions are applied with considerable limitations. Consequently, basic directions for subsequent tax reform in Ukraine are outlined and recommendations to improve income tax are developed. Such recommendations include dropping restrictions on the application of social tax allowance, and expansion of the list of expenditures that can be deducted from taxable income.