, associate professor, professor, Kharkiv, Svobody Sq. 4,
, associate professor, Kharkiv, Frunze, 21

In heading

Economic theory;

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Issues number

2017 - № 4 (31)



Type of articles

Scientific article

Code UDK


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Problem setting. The international competitiveness of a country is determined to a large extent by how conducive its institutional environment to business development is. An important part of the overall institutional environment is the tax system, whose impact on business activities and socio-economic development of the society can hardly be overestimated.
Recent research and publications analysis. The results of comparative international studies conducted by PwC and the World Bank (Paying Taxes 2017), and by the World Economic Forum (The Global Competitiveness Report 2017–2018) provide convincing evidence that the current tax system in Ukraine is characterized by low efficiency and requires substantial improvements.
This, in turn, calls for significant changes in the methodological approaches used by the government to planning and carrying out institutional reforms.
Paper objective. We argue that reforms of the Ukrainian tax system must be based on a thorough economic analysis using the methodology of New Institutional Economics, and, in particular, insights from of one of its main branches – Transaction Cost Economics.
Paper main body. This determined the choice of the research object (the tax system of a society) and the subject matter of the research (transaction costs associated with the functioning of the tax system).
We assume that the total costs a tax system imposes on business include not only the amount of tax paid but also some other costs, in particular the costs of searching for information on tax legislation, costs of tax accounting, costs of reporting and so on.
Thus, we contend that the overall transaction costs incurred by business can be divided into two groups: transaction costs arising from the interactions with business partners, and transaction costs generated in the process of interactions with the government (state), which provides institutional support to business.
We analyze the effect of the principal-agent problem on the efficiency of the tax system functioning. Tax officials, controlling the fulfillment of tax obligations by taxpayers, act as agents of the government (principal). The economic interests of the agents only partially coincide with those of the principal, and as a result, the agents may pursue their own interests at the expense of the principal. It happens when tax officials and taxpayers develop corruption schemes in which the tax burden for the taxpayer is reduced in exchange for a bribe paid to the tax official.
Conclusions of the research. We conclude that for improving the efficiency and effectiveness of the tax system of a society, changes in tax legislation alone are insufficient. Changes made to formal institutions must be accompanied by changing the public attitude towards tax evasion, specifically by fostering intolerance of tax evasion as socially unacceptable behavior.
Short Abstract for the article
Abstract. In the paper, the essence of the tax system of a society is defined within the framework of transaction cost theory. The current state of the Ukrainian tax system is described and selected problems in the field of business taxation in Ukraine are analyzed in terms of transaction cost economics and agency theory. The tasks and prospective directions for improving the efficiency of the Ukrainian tax system are identified.


Taxes, tax system, transaction costs, economic institutions, new institutional economics, country competitiveness.


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