MODELING OF CONSUMPTION TAXES FOR DIFFERENT MARKET FRAMEWORK: THE CASE OF UKRAINE

In the context of current discussion related to the improvement of efficiency of consumption taxes we developed a theoretical framework to model the turnover taxation. We empirically tested the capacity of VAT to stimulate the labor productivity in different markets. The results showed that this dependence is significant for the sectors similar to perfect competition markets, while in industries similar to monopoly and oligopoly this correlation is absent or insignificant. This means that in competitive markets the VAT should be kept, while in markets with imperfect competition the replacement of the VAT with other indirect tax, notably the turnover tax, could be considered. We conclude by determining, based on the developed theoretical model, weaknesses, which should be taken into account by policymakers and tax officials when designing tax reform policy in order to prevent market failures.