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The effect of tax-tariff reform: evidence from Ukraine

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  • Sokolovska, Olena
  • Sokolovskyi, Dmytro

Abstract

The paper examines the tax-tariff reform, recommended for Ukraine by donor organization (IMF and the World Bank), which consists in trade liberalization by way of trade tax cuts with simultaneous compensation of state tax revenue losses by VAT base broadening. We developed the mathematical model of evaluation of crossborder taxation influence on commodity flows, on economic agents’ profits and on state tax revenues, which can be considered as extension of “Devarajan” and “Emran–Stiglitz” models, with regard to possibility of tax evasion and receiving the illegally compensated VAT. The evaluation of model using data bases, prepared by Ukrainian State Statistic Committee and Customs administration of Ukraine, revealed that the expediency to reform a tax-tariff system, according to the IMF recommendations, is not clearly obvious and it depends on tax rates elasticity of size of informal sector. We find that providing the trade liberalization by way of substitution of trade tax revenues by enlarged VAT is expedient in those branches of economy, which are characterized by monopoly and oligopoly situation.

Suggested Citation

  • Sokolovska, Olena & Sokolovskyi, Dmytro, 2011. "The effect of tax-tariff reform: evidence from Ukraine," MPRA Paper 42643, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42643
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    File URL: https://mpra.ub.uni-muenchen.de/42643/4/MPRA_paper_42643.pdf
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    References listed on IDEAS

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    1. Friedrich Schneider & Robert Klinglmair, 2004. "Shadow economies around the world: what do we know?," Economics working papers 2004-03, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Michael Keen & Jenny E. Ligthart, 2005. "Coordinating Tariff Reduction and Domestic Tax Reform under Imperfect Competition," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 385-390, May.
    3. M. Shahe Emran & Joseph E. Stiglitz, 2004. "Price-neutral Tax Reform With an Informal Economy," Public Economics 0407010, University Library of Munich, Germany.
    4. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
    5. Jenny Ligthart & Gerard C. van der Meijden, 2010. "Coordinated Tax-Tariff Reforms, Informality, and Welfare Distribution," CESifo Working Paper Series 3107, CESifo Group Munich.
    6. Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
    7. Azim M Sadikov & Hans P Lankes & Dustin Smith & Katrin Elborgh-Woytek & Jean-Jacques Hallaert, 2006. "Fiscal Implications of Multilateral Tariff Cuts," IMF Working Papers 06/203, International Monetary Fund.
    8. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
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    Cited by:

    1. Sokolovska, Olena & Sokolovskyi, Dmytro, 2016. "Optimization of government trade behavior and its implication for small developing economy (the case of Ukraine)," MPRA Paper 71983, University Library of Munich, Germany.

    More about this item

    Keywords

    trade tax; tax-tariff reform; VAT; informal sector;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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