The analysis of indicators of the personal income tax fiscal efficiency

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Annotation

УДК 336.221.4 JEL Classification: H25; H71

THE ANALYSIS OF INDICATORS OF THE PERSONAL INCOME TAX FISCAL EFFICIENCY

O. Zyma - PhD in Economics, Associate Professor of the Department of Taxation of Simon Kuznets Kharkiv National University of Economics (9-A Lenin Ave., 61166, Kharkiv, Ukraine, e-mail: olyazyma@ukr.net).

O. Preobrazhenska - PhD in Economics, Associate Professor of the Economic Analysis Department of Simon Kuznets Kharkiv National University of Economics (9-A Lenin Ave., 61166, Kharkiv, Ukraine, e-mail: kvaso4ka@rambler.ru).

The indicators that can be used for evaluation of the fiscal efficiency of the personal income tax have been examined. The tax revenue to Ukraine's consolidated and local budgets including the regional one has been analyzed. The share of the personal income tax (PIT) in the tax revenue has been calculated in the regional context. Tax and personal income tax elasticity ratios have been calculated.

It has been proved that reducing costs of collecting the personal income tax may be connected with the necessity of introduction of the nontaxable income indicator in the amount of the subsistence level for the able-bodied population. It has been validated that increasing the state revenue and reducing the tax collection expenditures should be based on the monitoring and evaluation of such expenditures.

Keywords: fiscal efficiency, personal income tax, tax elasticity ratio, tax revenue.

АНАЛІЗ ПОКАЗНИКІВ ФІСКАЛЬНОЇ ЕФЕКТИВНОСТІ ПОДАТКУ НА ДОХОДИ ФІЗИЧНИХ ОСІБ

Зима Ольга Григорівна - канд. екон. наук, доцент кафедри оподаткування Харківського національного економічного університету імені Семена Кузнеця (61166, Україна, м. Харків, пр. Леніна, 9-A, e-mail: olyazyma@ukr.net).

Преображенська Олена Сергіївна - канд. екон. наук, доцент кафедри економічного аналізу Харківського національного економічного університету імені Семена Кузнеця (61166, Україна, м. Харків, пр. Леніна, 9-A, e-mail: kvaso4ka@rambler.ru).

Проаналізовано показники, стосовно яких можна здійснювати оцінювання фіскальної ефективності податку на доходи фізичних осіб. Здійснено аналіз податкових надходжень до зведеного та місцевого бюджетів України, у тому числі в регіональному аспекті. Розраховано частку податку на доходи фізичних осіб у податкових надходженнях у регіональному аспекті. Розраховано коефіцієнти еластичності податків та податку на доходи фізичних осіб.

Обґрунтовано, що зменшення витрат на стягнення податку на доходи фізичних осіб може бути пов'язане з необхідністю введення показника неоподатковуваного доходу в розмірі прожиткового мінімуму для працездатної особи. Доведено, що для збільшення доходів бюджетів країни та зменшення витрат на стягнення податку необхідно здійснювати моніторинг та оцінювання таких витрат.

Ключові слова: фіскальна ефективність, податок на доходи фізичних осіб, коефіцієнт еластичності податків, податкові надходження.

АНАЛИЗ ПОКАЗАТЕЛЕЙ ФИСКАЛЬНОЙ ЭФФЕКТИВНОСТИ НАЛОГА НА ДОХОДЫ ФИЗИЧЕСКИХ ЛИЦ

Зима Ольга Григорьевна - канд. экон. наук, доцент кафедры налогообложения Харьковского национального экономического университета имени Семена Кузнеца (61166, Украина, г. Харьков, пр. Ленина, 9-A, e-mail: olyazyma@ukr.net).

Преображенская Елена Сергеевна - канд. экон. наук, доцент кафедры экономического анализа Харьковского национального экономического университета имени Семена Кузнеца (61166, Украина, г. Харьков, пр. Ленина, 9-A, e-mail: kvaso4ka@rambler.ru).

Проанализированы показателей, по которым можно осуществлять оценку фискальной эффективности налога на доходы физических лиц. Осуществлен анализ налоговых поступлений в сводный и местный бюджеты Украины, в том числе в региональном аспекте. Рассчитана доля налога на доходы физических лиц в налоговых поступлениях в региональном аспекте. Рассчитаны коэффициенты эластичности налогов и налога на доходы физических лиц.

Обосновано, что уменьшение расходов на взимание налога на доходы физических лиц может быть связано с необходимостью введения показателя необлагаемого дохода в размере прожиточного минимума для трудоспособного населения. Доказано, что для увеличения доходов бюджетов страны и уменьшения расходов на взимание налога необходимо осуществлять мониторинг и оценку таких расходов.

Ключевые слова: фискальная эффективность, налог на доходы физических лиц, коэффициент эластичности налогов, налоговые поступления.

© О. Zyma, O. Preobrazhenska, "Економіка розвитку" (Economics of Development), № 1 (73), 2015.

Content

Different taxes in the tax system may have different fiscal efficiency, because they have different fiscal capacity and can be compared based on the value of on-going administration costs. Taxes with a high fiscal capacity and opportunities of administering through the use of computer technologies are of the highest fiscal efficiency.

The development of the market system in Ukraine requires studying tax revenues to budgets of different levels, in particular the analysis of the personal income tax revenue on both the state and regional levels. Such analysis affords an opportunity for introducing changes in the tax and budget legislation. Unlike foreign countries, in Ukraine there are disagreements over the performance of fiscal process in terms of exemption of the share of personal income, and the social equity principium is infringed in the process of taxation.

Implementation of the fiscal function must be based on the principle of fiscal performance with the key features: income adequacy, minimization of administrative costs, prevention of tax evasion, tax elasticity, equal balance among different social groups of taxpayers (population) and others [1].

Table 1. Tax revenue to the consolidated and local budgets of Ukraine

Problems concerning personal income tax have been studied by national scientists: O. Vasylyk, V. Vishnevskyi, M. Demianenko, Yu. Ivanov, S. Kalambet, P. Laik, V. Melnyk, A. Podderohin, A. Sokolovska, L. Shablysta, K. Schvabii and others. However, taking into consideration the reforms in the system of personal income taxation, evaluation of the fiscal efficiency of the personal income tax is still the matter of importance in the up-to-date Ukrainian context.

The aim of the study is to analyze the indicators which may be used for evaluation of the fiscal efficiency of the personal income tax for increasing the state revenue and reducing the tax collection expenditures.

In a majority countries the personal income tax is a budget revenue generating tax. Its importance in the tax system is determined by several factors [1, p. 137]:

the revenue of an individual, a taxpayer, is an object of taxation;

all the able-bodied citizens who provide stable and periodic revenue receipts to the budget are taxpayers;

the personal income tax corresponds to the fundamental principles of taxation: compulsory sustainability, social equity, fiscal efficiency for the state;

collection of tax at the sources of revenue payments simplifies the control over promptitude and completeness of payments by the tax authorities.

It should be also noted that the personal income tax is one of the most influential forms of relationships among the state, local governments and citizens concerning deduction of the income share of the latter for creation of funds of national and local importance. This is mainly by means of the personal income tax that the state and local authorities are able to fulfill their functions. The dynamics of tax revenue from the personal income tax in the consolidated and local budgets of Ukraine is presented in the Table 1 [2].

As presented in Table 1, the share of tax in the tax reve-nue to the local budgets of Ukraine is 74.4 % on average, almost the regions, budgets is formed by the personal income tax.

As for the revenue from the personal income tax in the dynamics of such revenue is presented in two-thirds of the local Table 2.

Table 2. Revenue receipts of the personal income tax in the regions [3]

For the analysis of changes in the tax revenue from the personal income tax in the regions, it is necessary to calculate the PIT share in the tax revenue receipts of the regions [3] index, which gives an opportunity to evaluate the share of the personal income tax (Table 3).

Table 3. Changes in the tax elasticity ratios during the period of 2005-2013

As shown in Figure, the PIT elasticity ratios are close to 1, that is considered optimal and is an evidence of minimal distortion, which is usually caused by taxation in the GDP generation. As presented in Table 3, in Kirovohrad region the level of the PIT relative share in the tax revenue receipts is the highest of all the regions. In most regions the tax share is less than average.

Tax elasticity is the main macroeconomic indicator which reveals the dependence of taxation in the economy on substantial macroeconomic factors [4, p. 15]. It is used to distinguish changes in the tax revenue under the influence of the gross domestic product, the income in the personal sector, the level of retail prices, etc., and it is a measure of the efficiency of tax regulation.

The value of the tax elasticity ratio should be close to 1, i.e. the dynamics of the tax revenue (the share of taxes), including the PIT, remains constant despite the increase (decrease) in the GDP. This value is considered optimal, demonstrating a minimal distortion level, which is usually caused by taxation. The low value of this indicator or, conversely, its high value (much less or more than 1) indicates the need to reduce the distortion effects of the tax system [5, p. 232-236].

For illustration purposes, the calculated values of the tax elasticity ratios are presented (Figure).

Analysis of the tax revenue from the personal income tax, calculation of the tax share in the tax revenue to local budgets, and the elasticity ratio doesn't make it possible to evaluate the fiscal efficiency of the personal income tax to the full extent. It is confirmed by studies of K. Proskura [6], who considered the tax fiscal efficiency to be the ratio of the absolute amount of taxes and its absolute administrative expenses (during the same period). The fiscal efficiency is of direct dependence on the fiscal performance (revenue) and of inverse dependence on administrative expenses [7, p. 223].

The fiscal efficiency of the tax system or a specific tax, the personal income tax in particular, can be quantitatively evaluated as the ratio of the absolute amount of the tax revenue (or a revenue from a specific tax (the personal income tax)) to the tax administrative expenses (specific tax (personal income tax) administrative expenses). That is, the fiscal efficiency FE can be calculated according to the formula:

FE = ATR / AE, (1)

where ATR is the amount of the tax revenue (the fiscal efficiency);

AE is the administrative expenses (in the total system or a definite tax (the PIT)).

The fiscal efficiency index demonstrates the amount of the fiscal revenue (in the total system or a separate tax (the PIT)) the state derives from a unit of financial resources. income tax indicator efficiency

Moreover, it is necessary to consider the viewpoint of V. Melnik [8, p. 7], who demonstrated the complexity of measuring the impact of tax administration on the tax system efficiency. The main reason is an extreme complexity of economic relations generated by the tax system. These relations can often be neither a cause nor a consequence of the outcome of actions of the individual elements of the tax system In addition, there is a lack of practical base for the calculation. Thus, in Ukraine the state statistical services and regulatory authorities in the sphere of taxation do not monitor expenses, which can be used to administer certain taxes. Therefore, calculation of the fiscal efficiency of certain taxes can only be based on the use of indirect methods of analysis and techniques of abstraction.

Reducing the cost of the revenue collection is the consequence of the fact that taxes are collected not just to cover corresponding costs [9]. Thus, maximum reduction of expenses on the system which provides prompt and correct revenue from taxes is one of the essential elements of the fiscal efficiency of the tax revenue from the personal income tax. This cost reduction may be a result of simplification of the personal income tax calculation, in particular, the reduction of expenses on the personal income tax collection may be caused by the introduction of the nontaxable income indicator in the amount of the subsistence level for the able-bodied population instead of the tax social privilege in the Tax Code of Ukraine. By using this indicator a large number of payers with low income may be exempted from taxation, as the revenue from such taxpayers is often less than the state administrative expenses. And these actions are committed to the principium of social equity as well.

A promising area for further research is the evaluation of the method of using the nontaxable income indicator for personal income tax calculation as well as the method of calculation of administrative expenses.

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