TAX SYSTEM OF UKRAINE UNDER THE CONDITIONS OF MARTIAL LAW: SHORTCOMINGS AND PROSPECTS

Abstract

With the introduction of martial law, state institutions intensified their work to find optimal tools for improving the tax system. But the processes of the development of military events are more dynamic than changes in the structure of the economy, which caused difficulties in finding the optimal balance between maintaining the stability of the tax system, domestic business, citizens and meeting the needs of the army. Such attention to changes in the processes of functioning of the tax sphere of Ukraine is not accidental, since it affects the efficiency of the financial sector of the state in terms of redistribution of financial resources, defined structures and rates of taxes, regulation of the mechanism of taxation in conditions of martial law. The main tasks of the future tax reform of Ukraine are defined, which should form a new institutional environment of taxation, increase the fiscal efficiency of taxes, as well as influence the regulatory potential of the tax system and tax law. Today, Ukraine’s own revenues in war conditions and the share of military expenditures in the budget of almost 60% cover only up to 40% of all state budget expenditures. Increased taxation of environmental pollution and harmful consumption, i.e. tobacco, alcohol, oil products, are considered compensators of budget revenues. The analysis of changes in the income items of the State Budget during the war period showed that since the beginning of the war, foreign official grants to the general fund of the budget and charitable donations to the special fund of the budget began to form a significant part of the budget’s income. In 2023, the last two sources replenished the budget by almost UAH 450 billion, which is 9.4% less than in 2022 (see table), which is a positive dynamic for our state in the conditions of martial law and post-war recovery. Taking into account the above, it should be determined that the main task of the state in the conditions of martial law should be the maximum simplification of the structure of the tax system to ensure the stability of tax revenues to the budget and the expansion of the tax base. In this way, Ukraine, preparing the future reform, must find a balance between the tasks of mobilizing resources for the state budget and creating incentives for economic growth. In our opinion, it should be taken into account that while the Ukrainian budget bears the burden of financing military and social needs, the adoption of drastic changes in the taxation system may lead to negative consequences and no compensators will be able to fill the budget deficit. Therefore, in the conditions of martial law, the introduction of the reform of the tax system should be measured and gradual.