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Market And Government Failures Related To The Introduction Of Tax Incentives Regime

Author

Listed:
  • Olena SOKOLOVSKA

    (PhD, Senior Researcher, Leading Researcher, Department of economic and mathematical modeling in taxation, Research Institute of Fiscal Policy, State Fiscal Service of Ukraine)

  • Dmytro SOKOLOVSKYI

    (PhD, Senior Researcher, Institute of Industrial Economics of National Academy of Sciences of Ukraine)

Abstract

The paper deals with problem of effectiveness of tax incentive regimes. The main purpose of this paper is to define causes, factors and measures aimed to prevent and neutralize failures of introduction of tax incentives. In order to examine the behavior of economic agents we used game theory tools, notably the “principal-agent” model, similar to the Allingham-Sandmo model. To solve a problem of inefficient interaction, when investors unreasonably pretend on tax incentives and government ignore that by granting them incentives, we proposed to use Nash-equilibrium in pure strategies. Finally we defined factors of improvement of efficiency of tax incentive regimes, particularly mechanisms of their implementation and termination.

Suggested Citation

  • Olena SOKOLOVSKA & Dmytro SOKOLOVSKYI, 2015. "Market And Government Failures Related To The Introduction Of Tax Incentives Regime," Economy and Sociology, The Journal Economy and Sociology, vol. 4(4), pages 17-26.
    • Handle: RePEc:aat:journl:238
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