Bechko Petro, Ph. D. in Economics, Professor, Professor of the Department of Finance, Banking and Insurance of Uman National University of Horticulture, Uman, Ukraine

ORCID ID: 0000-0003-0928-4778
e-mail: petro19500807@gmail.com

Barabash Lesia, Ph. D. in Economics, Associate Professor, Associate Professor of the Department of Finance, Banking and Insurance of Uman National University of Horticulture, Uman, Ukraine

ORCID ID: 0000-0002-4836-8950
e-mail: Lesly-z@ukr.net

Kobylianskyi Maksym, Ph. D. student of the Department of Finance, Banking and Insurance of Uman National University of Horticulture, Uman, Ukraine

ORCID ID: 0000-0002-0696-341X
e-mail: kobylianskiy@gmail.com

Nahorna Yulia, external Ph. D. student of the Department of Finance, Banking and Insurance of Uman National University of Horticulture, Uman, Ukraine

ORCID ID: 0000-0002-0959-3928
e-mail: igorovna118114@gmail.com

Tax Incentives for Business Entities of Agricultural Sector as a Part of a Regulatory Mechanism: Best Practices

Introduction. In the present-day conditions of Ukraine, the question of tax incentives for business entities in the agricultural sector requires an efficient regulatory mechanism, which would encourage sustainable development of all forms of agricultural production.

Purpose. To identify the problematic tax incentive tools of the regulatory mechanism on manufacturers of agricultural goods it is necessary to employ a comparative study of the best practices existing in domestic and foreign practices designed to solve identical problems. This will make it possible to identify promising optimization, the implementation of which will encourage the establishment and development of small business entities in the agricultural sector.

Results. Familiarization with the best foreign practices of the tax incentive tools used in state regulation of manufacturers of agricultural goods makes it possible to identify significant likenesses between them and the best domestic practices. However, significant differences are also present.

Specifically, domestic practices abolished preferential mechanisms for charging value added tax and created strict taxation conditions under a simplified taxation scheme, which made impossible the efficient development of small-scale manufacturers. A similar situation is observed in relation to the land value tax. To calculate it, the same tax rates are applied for all taxpayers, without distinguishing the stimulating component for the small farmer and personal agricultural enterprises. Unlike in the best foreign practices, tax incentives to prolong preferential conditions for the newly created enterprises or use of reduced tax rates for them are absent. At the same time, in spite of the small number of tax payments (5), the tax burden in Ukraine is quite high (37.8%), and the indicator of tax calculation and reporting is 240 hours.

Conclusion. The existing disadvantages to the tax incentive tools of the regulatory mechanism of agrarian production significantly reduce its efficiency. Therefore, it is worthwhile to reconsider the conditions for the functioning of the simplified taxation system through a prism of stimulating farmer and personal production through tax preferences, lowering tax rates, prolonging grace periods and using stimulating elements in the indirect taxation sector, in particular, the return of special VAT regimes.

Keywords: tax incentives; state regulation; land value tax; tax burden; simplified taxation scheme; agricultural production.

References:

1. Hudz,O. Ye. (2012). Tax Regulation of the Agri-Sphere Development in Ukraine. Efektyvna ekonomika. Retrieved from http://www.economy.nayka.com.ua/?op=1&z=880 [in Ukrainian].
2. Dankevych,V. Ye. (2013). Special Aspects of the Use of the World Land Resources. Economic Scope, 74, pp. 15-23 [in Ukrainian].
3. Dema,D. I. (2016). Tax Incentives for Production of Ecologically Clean Agricultural Products. Orhanichne vyrobnytstvo i prodovolcha bezpeka [Organic Production and Food Safety], IV Mizhnarodna naukovo-praktychna konferentsiia [IV International scientific and practical conference]. Zhytomyr: O. O. Yeveniuk, pp. 379-382 [in Ukrainian].
4. Doernberg, R. (1997). Mezhdunarodnoe nalogooblozhenie (translated from English). Moscow: JUNITI [in Russian].
5. Dolzhenko, I. I. (2016). Trends in Budgetary and Tax Incentives for Agriculture of Ukraine. Scientific Journal of National University of Life and Environmental Sciences of Ukraine. Series: Economy, Agrarian Management, Business, 247, pp. 99-110 [in Ukrainian].
6. Karlin,M. I. & Lipovska-Makovetska, N. I. (2016). Podatkovi systemy krain Azii: navch. posib. Lutsk: Vezha-Druk [in Ukrainian].
7. Kovalenko,L. O. & Mikheienko, T. V. (2016). VAT Management in the System of Financial Management. Scientific Bulletin of Polissia, 4 (8),  293-302 [in Ukrainian].
8. Kravchuk,O. & Odosii, O. (2015). Agribusiness: Subsidize or Impose Taxes? Commons. Retrieved from https://commons.com.ua/uk/podatkova-sistema-agrobiznesu-dotuvati-chi-opodatkovuvati/ [in Ukrainian].
9. Krylova, A. O. (2008). Gross Value Added as a Comparison Indicator of Financial Systems. Regional Economy, 3. pp. 90-95 [in Ukrainian].
10. Levchenko,N. (2010). Essential Nature of the State Policy of the Innovative Development of the Agro-Industrial Complex and Its Major Lines. Teoriia ta praktyka derzhavnoho upravlinnia, 2. pp. 287-295 [in Ukrainian].
11. Tax Code of Ukraine (2019). Law of Ukraine No. 2755 of December 2, 2010 (as on January 1, 2019). Buhgalter 911. Retrieved from https://buhgalter911.com/normativnaya-baza/nalogovyi-kodeks/ [in Ukrainian].
12. Tax Code of Ukraine (2019). On Amendments Being Made to the Tax Code of Ukraine and Certain Statutory Instruments of Ukraine Concerning the Tax Reform: Law of Ukraine of December 28, 2014 No. 71-VIII. Legislation of Ukraine. Retrieved from https://zakon.rada.gov.ua/laws/show/71-19 [in Ukrainian].
13. Savenko,S. V. (2019). Rankings of the Tax Climate in Ukraine has Doubled. Finance UA. Retrieved from https://news.finance.ua/ua/news/-/415318/v-ukrayini-vdvichi-pokrashhyvsya-rejtyng-podatkovogo-klimatu [in Ukrainian].
14. Tretiak,A. & Druhak, V. M. (2003). Naukovi osnovy ekonomiky zemlekorystuvannia ta zemlevporiadkuvannia. Kyiv: TSZRU [in Ukrainian].
15. Chan-khi,O. S. (2016). European Practice for Agricultural Co-operatives Taxation: Experience for Ukraine]. Efektyvna ekonomika, 11. Retrieved from http://www.economy.nayka.com.ua/?op=1&z=5241 [in Ukrainian].
16. Melnik, A. M. (2016). Improving the Inheritance Taxation as an Element of Real Estate Taxation: the UK Experience. Independent Auditor, p.69 [in English].
17. Paying Taxes (2016). The global picture. World Bank Group and PwC. 2016. Retrieved from https://www.pwc.com/gx/en/payingtaxes-2016/paying-taxes-2016.pdf [in English].