The Regulatory Effect of Tax Policy on the Economy

The article analyzes and systematizes the experience of the regulatory effect of the tax component of fiscal policy on the economy. It is demonstrated that the priorities of modern tax policy implementation include ensuring the sustainable development of civil society institutions, strengthening the capacity for public regulation of development, macro-financial stability, security for all economic agents, reliable social protection, and improving welfare, as well as coordinating the implementation of transformational measures across all areas of society’s economic life. The influence of tax policy on investment processes in EU–27 member countries and Ukraine is examined. Different methods of tax regulation for economic development are considered, including reducing income tax levels through rate cuts or creating special zones with preferential taxation, tax holiday regimes, and so on; active fiscal stimulation of investment in fixed capital through the application of tax benefits, credits, and exemptions for the portion of profits reinvested in fixed capital; improving conditions for cross-border capital flows by minimizing tax rates on profit repatriation, removing restrictions on dividend payments to shareholders residing in foreign countries, and targeted reduction of customs tariffs; providing social contribution benefits for newly created jobs. It is proved that the implementation of tax benefits should be clearly time-limited and directed toward predetermined objectives. A model has been proposed to assess the impact of the budgetary and tax components of fiscal policy on economic growth processes. A regression analysis was conducted on the effect of different groups of taxes on the macro-dynamics of a sample of the EU Member States located in Central Europe and the Baltic region. The structure of tax revenues and social contributions has been analyzed, taking into account the level of their allocation in individual EU–27 member countries and Ukraine. The need to improve the institutional architecture of the domestic fiscal space has been substantiated.