1. Olena Sokolovska, 2. Dmytro Sokolovskyi, Univerzitet Metropolitan, Ukraine
The article deals with investors’ economic behavior in the context of achieving of tax neutrality as a state which minimizes the changes in decision-making process of economic agents caused by tax factors. The comparative analysis of types of neutrality is made.
The two types of tax neutrality in the process of regulation of economic agents’ activity are examined: the tax neutrality itself and the neutrality, achieving by levying taxes.
Levying of capital income tax distorts the decisions of economic agents concerning the choice of funding sources (owned capital in the form of undistributed profits, debt capital and shareholder equity) and also concerning the choice of location of earned income (in country being source of income or in country where the company headquarter is located).
Those distortions render impossible the solution of optimal (i.e. in terms of effectiveness) capital allocation problem, which is possible in world without taxes.
To solve a problem of distortion and a problem of maximum effective capital allocation the approach to effective capital income taxation, based on maximum approximation in presence of institutional factor (“world without taxes”) to optimal capital allocation by applying principles of tax neutrality in open economy is submitted.
Now Ukraine as a transition country faces with deterioration of investment climate consisted in slump of investment on the part of developed EU countries and USA. Measures aimed to improve the investment climate and to form an effective structure of capital allocation can be taken notably through tax regulation.
In this regard the sequence of possible reforming of tax system in transition country by an example of Ukraine, the final stage of which is to statement of dual income tax system, providing the flat tax rate for all capital income and progressive tax rate for individual income, are provided.
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Датум:
14.09.2013.
REDETE 2014 - Researching Economic Development and Entrepreneurship in Transition Economies
