A Comparative Assessment of the Fiscal Rigidity of Tax Systems in European Countries

Анотація

The article examines the issues of comparative evaluation of tax systems in European countries in the context of the transformation of Ukraine’s public finances and its European integration course. The necessity of improving the methodology for measuring tax competitiveness is substantiated, taking into account the limitations of current international rankings, in particular The International Tax Competitiveness Index (ITCI), which is primarily oriented toward OECD countries. The aim of the study is to develop an alternative integrated approach to assessing the taxation systems of European countries and to formulate conclusions regarding the reform of Ukraine’s tax system. A model of integrated assessment based on the iterative principal component method is proposed, which allows for the aggregation of key rate indicators (corporate income tax, personal income tax, and VAT) into a single index with the minimization of errors and simplification of the calculation algorithm. The practical implementation of the model is carried out using MS Excel with VBA. The assessment results confirmed the dependence of a country’s ranking position on the level of nominal rates, primarily the marginal personal income tax rate. Leading countries are those with moderate direct taxation, while high personal income tax rates reduce the overall index regardless of the VAT or corporate tax levels. Ukraine holds relatively high positions due to moderate rates, but its competitiveness is limited by institutional factors, particularly the complexity of administration and unpredictability in the application of regulations. It was found that increasing the competitiveness of the tax system is not ensured by a mechanical reduction of rates and does not guarantee growth in budget revenues. It is substantiated that under wartime and postwar fiscal constraints, the «10-10-10» model does not have sufficient evidence to support an increase in the efficiency of the taxation system. It has been proved that the strategic direction of reform should be the modernization of administration, digitalization, expansion of the tax base, and reduction of the level of shadow economy while ensuring the balance of the fiscal and stimulating functions of the tax system.

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