APPROACHES TO ASSESSING THE FISCAL POTENTIAL OF CONSUMPTION TAXES
Abstract
The article examines the theoretical aspects of applying the tax elasticity of consumption taxation. The features of tax elasticity for assessing the fiscal potential of consumption taxes in the studies of Ukrainian and Western scholars are revealed. It is established that modern Western economic thought is significantly ahead of Ukrainian regarding the depth and diversity of research on the elasticity of consumption taxes. It is substantiated that understanding the elasticity of consumption taxes allows for making informed decisions on tax reform, revenue forecasting, and budget planning at the legislative level. It should be noted that the elasticity of consumption taxes, although informative, should be considered together with other factors, such as equity and administrative efficiency. One of the key indicators for assessing fiscal potential is the elasticity of consumption taxes. Tax elasticity is the response of tax revenues to changes in tax rates or tax bases. It provides an idea of the sensitivity of tax revenues to changes in economic conditions and taxpayer behavior. Assessing the impact of consumption taxes on income distribution is important for understanding their fairness and equity. The elasticity of consumption taxes provides an indication of their impact on the distribution of income among different groups of the population. Assessing the fiscal potential of consumption taxes requires considering economic aspects, political context, and goals. Based on the analysis of VAT and excise tax revenues for 2007-2021 in Ukraine, the paper estimates the tax elasticity of VAT and excise tax. As a result of the VAT assessment, it was concluded that VAT revenues were inelastic due to changes in the tax base and, therefore, not a sign of high fiscal potential. The results of assessing the elasticity of the excise tax in Ukraine also show a low elasticity and, on the contrary, theoretically indicate its high fiscal potential. Still, it can be realized only in conditions that reduce the level of the shadow economy. The study made it possible to distinguish the direction of elasticity of consumption taxes since, in the period of post-war reconstruction, the fiscal potential of consumption taxes will be determined mainly by consumer behavior and income levels.
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