ANALYSIS OF THE EFFECTIVENESS OF SINGLE SOCIAL CONTRIBUTION REFORM IN UKRAINE IN 2016
DOI:
https://doi.org/10.18371/fcaptp.v4i35.221852Keywords:
SSC, SSC reform, tax rate, tax burden on labor, de-shadowing of wages, informal employmentAbstract
In view of the need to define the areas of further improvement of the mechanism of levying single social contribution (SSC), considering the challenges and threats stemming from the increasing deficit of the Pension Fund of Ukraine, an analysis of reforms of the said contribution implemented during 2015—2017 in the context of their effect on the degree of shadowization of wage payments in the country becomes especially important.
The scientific rationale for the expediency of lowering the SSC rate in order to reduce the degree of shadowization of wage payments was analyzed. The reform of SSC in Ukraine in 2016 was assessed in the context of its effect on the degree of shadowization of wage payments and unofficial employment, which gave reasons to conclude that no significant positive effects were produced by the said reform. An insignificant decline of these indicators is incomparable with the adverse consequences which this reform had for revenues of the Pension Fund of Ukraine. Calculations of tax burden on the wages paid in Ukraine in 2010—2019 were made. It was established that in 2016, tax burden on payroll fund declined to 28,58% versus 2015, but the following years saw an insignificant growth of this indicator to 30,16% in 2019. It was proved that the drastic lowering of the SSC rate did not stimulate employers to deshadowize wages. For when Ukrainian lawmakers initiated this reform, they failed to take into account a number of nontax factors in deshadowization of wage payments related, in particular, to the quality of Ukrainian legislation and regulatory policy and to the level of corruption in the country. Given that employers remain able to conceal the actual number of personnel and the amount of their wages, it will be impossible to solve the problem of unofficial employment and shadowization of wage payments only by lowering the SSC rate. An emphasis was placed on the need to apply a systemic approach to the assessment of possible consequences from future transformations of SSC and their impact on tax burden on payroll fund in terms of all its components and taking into account nontax factors in deshadowization of wage payments.
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2. Schneider, F. (2011). The Shadow Economy and Shadow Economy Labor Force: What Do We (Not) Know? IZA Discussion Paper, 5769. Retrieved from http://ftp.iza.org/dp5769.pdf.
3. Schneider, F. (2016). The size and development of the shadow economies of Ukraine and six other eastern countries over the period of 1999—2015. Ekonomika rozvytku — Economics of Development, 2 (78), 12—20[in English].
4. Schneider,F., & Buehn,A. (2016, March). Estimating the Size of the Shadow Economy: Methods, Problems and Open Questions. IZA Discussion Paper,9820. Retrieved from http://ftp.iza.org/dp9820.pdf.
5. Sokolovska, А. M. (2013). Opodatkuvannia v konteksti detinizatsii ekonomiky [Taxation in the context of de-shadowing of the economy]. Visnyk Instytutu ekonomiky ta prohnozuvannia — Bulletin of Institute for Economics and Forecasting,32—38 [in Ukrainian].
6. Sokolovska, А. M. (2015). Reforma yedynoho sotsialnoho vnesku na zahalnooboviazkove derzhavne sotsialne strakhuvannia
v Ukraini [Reform of the single social contribution to the obligatory state social insurance in Ukraine]. Finansy Ukrainy — Finance of Ukraine, 7, 7—23 [in Ukrainian].
7. Serebrianskyi,D., & Vdovychenko, A. (2016, June 4). YeSV i detinizatsiia: falstart chy pochatok strukturnykh zmin? [SSC and de-shadowing: false start or the beginning of structural change?].Dzerkalo tyzhnia — Mirror of the week. Retrieved from https://dt.ua/finances/yesv-i-detinizaciya-falstart-chi-pochatok-strukturnih-zmin-_.html [in Ukrainian].
8. Engler, P., Voigts, S., Kirchner, Р., & Betliy, О. (2016). Economic Impact of the Recent Decrease in Social Security Contributions in Ukraine. Visnyk of the National Bank of Ukraine, 237, 20—26.
9. Verkhovna Rada Ukrainy. (2011). Pro zbir ta oblik yedynoho vnesku na zahalnooboviazkove derzhavne sotsialne strakhuvannia: Zakon Ukrainy vid 08.07.2010 № 2464-VI [On the collection and accounting of a single contribution to the obligatory state social insurance: Law of Ukraine of July 08, 2010 № 2464-VI]. Vidomosti Verkhovnoi Rady Ukrainy — Bulletin of the Verkhovna Rada of Ukraine, 2—3. Retrieved from https://zakon.rada.gov.ua/laws/show/2464-17#Text [in Ukrainian].
10. Derzhavna sluzhba statystyky Ukrainy. (n. d.). Ofitsiinyi sait[Official site]. Retrieved from http://ukrstat.gov.ua/operativ/operativ2005/vvp/vvp ric/vvp_u.htm [in Ukrainian].
11. Ministerstvo rozvytku ekonomiky, torhivli ta silskoho hospodarstva. (2019). Tendentsii tinovoi ekonomiky v Ukraini u 2019 rotsi: Zvit [Trends in the shadow economy in Ukraine in 2019: Report]. Retrieved from https://ucap.io/wp-content/uploads/2020/06/1_shadow_2019.pdf [in Ukrainian].
12. Kyivskyi mizhnarodnyi instytut sotsiolohii. (2019). Tinova ekonomika v Ukraini. Rezultaty doslidzhennia 2019 roku. Proekt SHADOW (GA № 778188). [Shadow economy in Ukraine. The results of the study in 2019. SHADOW project under the HORIZON 2020 program (GA № 778188)]. Retrieved from http://kiis.com.ua/?lang=ukr&cat=reports&id=897&page=1 [in Ukrainian].
13. Emerging from the shadows: the shadow economy to 2025. (2017). Professional insight report, Association of Chartered Certified Accountants. Retrieved from https://www.accaglobal.com/content/dam/ACCA_Global/Technical/Future/pi-shadow-economy.pdf.
14. Mendoza, E. G., Razin, А., &Tesar, L. L.(1994). Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption. Journal of Monetary Economics,34 (3), 297—323.
15. Navickas, M., Juščius, V., &Navickas, V. (2019). Determinants of Shadow Economy in Eastern European Countries. Scientific Annals of Economics and Business, 66 (1), 1—14.
16. Ivanchuk, N. V. (2018). Faktory vplyvu na tinizatsiiu fondu oplaty pratsi v Ukraini [Factors affecting concealment of payroll
in Ukraine]. Finansovo-kredytna diialnist: problemy teorii ta praktyky — Financial and credit activity: problems of theory and practice, 2, 288—294 [in Ukrainian].
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