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The effect of tax-tariff reform: evidence from Ukraine

  • Sokolovska, Olena
  • Sokolovskyi, Dmytro

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42643.

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Date of creation: 10 Oct 2011
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Handle: RePEc:pra:mprapa:42643
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  1. Jenny Ligthart & Gerard C. van der Meijden, 2010. "Coordinated Tax-Tariff Reforms, Informality, and Welfare Distribution," CESifo Working Paper Series 3107, CESifo Group Munich.
  2. Schneider, Friedrich & Klinglmair, Robert, 2004. "Shadow Economies around the World: What Do We Know?," IZA Discussion Papers 1043, Institute for the Study of Labor (IZA).
  3. Keen, M. & Ligthart, J.E., 2004. "Coordinating Tariff Reduction and Domestic Tax Reform under Imperfect Competition," Discussion Paper 2004-78, Tilburg University, Center for Economic Research.
  4. Joseph E. Stiglitz & M. Shahe Emran, 2004. "Price Neutral Tax reform With an Informal Economy," Econometric Society 2004 North American Summer Meetings 493, Econometric Society.
  5. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
  6. M. Shahe Emran & Joseph E. Stiglitz, 2002. "On Selective Indirect Tax Reform in Developing Countries," International Trade 0210003, EconWPA.
  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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