Reforming the personal income tax in Ukraine for the post-war perspective in the era of digital transformation

Анотація

Economy in the era of digital transformation: trends, opportunities and perspectives The research examines the functioning of the personal income tax system (PIT) in Ukraine over the period 2018–2024, with particular attention to the organizational conditions of its implementation, the outcomes of its operation during this timeframe, and proposals for its optimization in the post-war context, taking into account global trends in the digitalization of tax systems. Within this framework, the authors outline the methodological foundations of the mechanism of personal income tax from the standpoint of its economic essence, the principles underlying its collection, and its core categorical characteristics – namely, political, financial, economic, and social. In view of the need to revise the philosophy of taxation in the post-war period, the study also considers the mechanism of personal income tax as a distinct behavioral and digital category. The research further analyzes the implementation of personal income tax at various levels of the budget system. The findings suggest that this tax demonstrates relative resilience to changes in the economic environment. However, deep structural disruptions – such as the COVID-19 lockdowns and Russia's fullscale invasion of Ukraine – have the potential to adversely affect its performance. The assessment of the effectiveness of the existing personal income tax collection mechanism indicates generally positive results. These include improvements in the gross tax gap, the tax collection rate, the level of fiscal significance of personal income tax in the state budget, the fiscal efficiency indicator, and the tax efficiency ratio in relation to GDP. Positive dynamics are also observed in both the fiscal efficiency indicator and the elasticity coefficient. Despite these favorable trends, the authors highlight the need to improve the mechanism of personal income tax in light of post-war recovery and evolving societal needs. It is demonstrated that the current proportional taxation system in Ukraine has several shortcomings, particularly its failure to account for social justice and income inequality. Accordingly, drawing on the theory of behavioral finance and international best practices, the authors propose transitioning to a progressive taxation model. This model would introduce differentiated tax rates based on income levels, thereby addressing behavioral aspects of taxation more effectively. A key component of the study is the digitalization of personal income tax as a means of enhancing administrative efficiency. In this context, the principal directions of digital transformation include automatic income declaration, the use of Big Data analytics to identify tax risks, the implementation of electronic taxpayer services, and the expansion of functionalities within the Diia mobile application for individual taxpayers.

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