PAYROLL TAXATION IN HIGHLY DEVELOPED COUNTRIES
Keywords:
payroll taxation, personal income tax, compulsory social security contributionsAbstract
Optimization of payroll taxation in current conditions is a priority measure to ensure the legalization of wages in Ukraine. It is necessary to investigate global trends of payroll taxation, as well as to study the experience of highly developed countries, which have succeeded in economic growth. The study of foreign experience of payroll taxation at an example of highly developed countries of the world showed the deeper progressiveness, higher rates and larger non-taxable income (tax allowance) in the collection of personal income tax compared to the situation in Ukraine. The maximum base of calculating social taxes was absent or significantly higher than the national one. Also during 2007-2014 Ukraine had a significant share of taxes on an average worker in labour cost (more than 40%). Tax burden of social taxes on employers in Ukraine was quite high comparing to the developed countries and the average of OECD.
Reform of payroll taxation in Ukraine launched in 2015 by applying a reduction factor to the single social contribution rate resulted in reducing the tax burden on employers. At the same time in 2015 the increase of companies’ payroll was 13%, while in the whole economy the growth rate of payroll was 6%. However, due to changes in 2016, payroll increased by 24% in the economy and the share of taxes on the average worker in the cost of labor in Ukraine decreased to 32.8%.
The introduction of a reduced flat rate of single social contribution in Ukraine committed since the beginning of 2016 will stimulate business, but the problem of filling the Pension Fund will not be solved because the average income in our country is low. Taking into account international experience, the main ways to improve payroll taxation in Ukrainian economy are to deep the progressiveness in the collection of personal income tax, to raise the tax allowance to the minimum level of subsistence for the able-bodied and to cancel the maximum base of single social contribution calculating.
