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Modeling Of Consumption Taxes For Different Market Framework: The Case Of Ukraine

Author

Listed:
  • Olena SOKOLOVSKA

    (Research Institute of Fiscal Policy State Fiscal Service of Ukraine, Kyiv Institute of Industrial Economy of National Academy of Sciences of Ukraine, Kyiv)

  • Dmytro SOKOLOVSKYI

    (Institute of Industrial Economy of National Academy of Sciences of Ukraine, Kyiv Vice-Director Dmytro SEREBRIANSKYI, PhD Research Institute of Fiscal Policy, State Fiscal Service of Ukraine, Kyiv)

Abstract

In the context of current discussion related to the improvement of efficiency of consumption taxes we developed a theoretical framework to model the turnover taxation. We empirically tested the capacity of VAT to stimulate the labor productivity in different markets. The results showed that this dependence is significant for the sectors similar to perfect competition markets, while in industries similar to monopoly and oligopoly this correlation is absent or insignificant. This means that in competitive markets the VAT should be kept, while in markets with imperfect competition the replacement of the VAT with other indirect tax, notably the turnover tax, could be considered. We conclude by determining, based on the developed theoretical model, weaknesses, which should be taken into account by policymakers and tax officials when designing tax reform policy in order to prevent market failures.

Suggested Citation

  • Olena SOKOLOVSKA & Dmytro SOKOLOVSKYI, 2016. "Modeling Of Consumption Taxes For Different Market Framework: The Case Of Ukraine," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(4), pages 75-92.
    • Handle: RePEc:cys:ecocyb:v:50:y:2016:i:4:p:75-92
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    References listed on IDEAS

    as
    1. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
    2. Charles Blackorby & Sushama Murty, 2013. "Unit Versus Ad Valorem Taxes: The Private Ownership of Monopoly in General Equilibrium," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(4), pages 547-579, August.
    3. Laszlo Goerke, 2012. "The Optimal Structure of Commodity Taxation in a Monopoly with Tax Avoidance or Evasion," Public Finance Review, , vol. 40(4), pages 519-536, July.
    4. Anderson, Simon P. & de Palma, Andre & Kreider, Brent, 2001. "The efficiency of indirect taxes under imperfect competition," Journal of Public Economics, Elsevier, vol. 81(2), pages 231-251, August.
    5. Blackorby, Charles & Murty, Sushama, 2007. "Unit versus ad valorem taxes: Monopoly in general equilibrium," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 817-822, April.
    6. Christos Kotsogiannis & Konstantinos Serfes, 2014. "The Comparison of ad Valorem and Specific Taxation under Uncertainty," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 48-68, February.
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    8. Arindam Das-Gupta, 2005. "With non-competitive firms, a turnover tax can dominate the VAT," Economics Bulletin, AccessEcon, vol. 8(9), pages 1-6.
    9. D. B. Suits & R. A. Musgrave, 1953. "Ad Valorem and Unit Taxes Compared," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 67(4), pages 598-604.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    VAT; turnover tax; consumption; competition; market failure.;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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