PRACTICE AND PROBLEMS OF EFFECTIVENESS OF PERSONAL INCOME FISCAL REGULATION

Abstract

The impact of the personal income taxation on the welfare of the population, as well as the identification of the problems of using the personal income tax as an instrument of the fiscal regulation of social processes is analyzed in the paper. It is substantiated that the domestic model of the personal income taxation is in constant transformation, but remains weak towards the reducing of the population property inequality likewise the level of shadow wages. The conducted analysis showed that the development of the personal income taxation in Ukraine takes place towards the lowering the rates and approving a proportional tax model. The noted reforms were intended to stimulate the output of the population from the shadow, but their efficiency is rather low. The introduction of the lower tax rates for passive (investment) income in 2017 should have encouraged the population to the financial investment. It is substantiated that because of the weak development of the financial market and the low income of the majority of the population, the effectiveness of such innovations is questionable, and they are more likely conditioned by the intention of the political elites to reduce the fiscal obligations to the budget. The domestic model of the personal income taxation is discriminatory in terms of the labor income in the form of wages. The calculation of the effective tax rate indicated that within the recent years, the level of the actual tax burden on incomes has increased by 1.5 times, and the labor income is taxed at a rate 1.5 times higher than the effective one. Instead, the passive incomes are taxed at the rates that are 1.3-2.3 times lower than the effective tax rate. Thus, the personal income tax in the part of the current rates is excessively fiscal and does not properly fulfill the social and regulatory functions. The consequence of the disadvantages of the personal income tax policy in Ukraine was the economic inequality, the extent of which can be assessed as the threatening for the stability of society, deepening of the poverty level. An assessment of the practice of applying the social tax benefit indicated that it did not fulfill its primary purpose – the protection against poverty. The recent innovations in the application of the social tax benefit override the number of its recipients, resulting in the loss of the sense of its existence. It is substantiated that the taxation of incomes should be developed towards the realization of its regulatory and social potential, namely overcoming the discriminatory nature of the labor income taxation, raising the level of the tax burden on the passive incomes, returning to the tax rates progression, and improving the use of the social tax benefit.