Socio-economic consequences and problems of labor taxation
Abstract
The development of each state and economic growth are highly related to the number of factors of production such as labor and capital along with higher productivity of utilizing them. Frequently, high unemployment rate (with small labor force participation) and significant “shadow” employment accused of the high tax burden on labor. Moreover, some assumptions exist that decrease in personal income tax or social security contributions paid by employee induce an increase in labor supply, and a decrease of payroll taxes increment the labor demand. However, the impact of the tax change on labor market depends on the behavioral responses of economic “players” estimated by elasticities. The higher elasticity of supply or demand means higher sensitivity to the tax changes, with relatively less elastic side bearing the higher tax burden.
We discussed the significant problems in the field of labour taxation and socio-economic consequences using the experience of Denmark, Estonia, Germany, Poland, Slovakia, and Ukraine. Unscrambling the decomposition of labour taxation, factors affecting labour supply and labour demand, tax incidence, employment problems and groups vulnerable to these problems. The main methods: a synthesis for primary concepts (labour taxation, take-home pay, tax wedge, tax incidence, payroll taxes); deduction; induction method for conclusions; statistical methods for analyzing revenues, structure, and composition of labour taxation between selected countries.
Anyway, taxes discourage both labor demand (by raising labor costs to employers) and labor supply (by lowering the real consumption wage of workers). They create a “tax wedge” between labor cost to the employer and the worker’s take-home pay and thereby reduce both employment and economic growth. We tried to discover the issues above concerning existing research data. However, the investigation scale needs to be expanded for the thorough look and deep awareness of taxation concepts and problems.
Keywords: taxes, tax system, labor taxation, take-home pay, tax wedge, payroll taxes, gross salary, social security contributions, personal income tax, implicit tax rate
References
Yushko S. V. (2013). Load on the payroll fund of economic entities as a factor in the shadowing the citizens` income/ S. V. Yushko // Finance of Ukraine, 2, 32-45.
Shvabij K. I. (2013). Priorities of the personal income tax reforms in modern conditions / K. I. Schwabius. // Collection of scientific works of the Irpin Finance and Law Academy (economics, law), 2.
International Monetary Fund. Available at: http://www.imf.org/external/ datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD.
European Commission. Available at: https://ec.europa.eu/taxation_ customs/sites/taxation/files/resources/documents/taxation/gen_info/economic_analysis/tax_papers/taxation_paper_56.pdf.
Knoema data base. Available at: https://knoema.com/atlas/Ukraine/Unemployment-rate.
Ieconomics database. Available at: https://ieconomics.com/ukraine-employment-rate#.
Knoema data base. Available at: https://knoema.com/atlas/Ukraine/topics/Economy/Inflation-and-Prices/PPP-for-private-consumption.
Trading Economics. Available at: https://tradingeconomics.com/ukraine/wages.
CASE Ukraine. The Price of the State website. Available at: http://cost.ua/budget/revenue/#1.
European Commission. Taxation Trends in the European Union. Available at: https://ec.europa.eu/taxation_customs/sites/taxation/files/taxation_trends_ report_2017.pdf.
Downloads
Published
Issue
Section
License
Relationship between right holders and users shall be governed by the terms of the license Creative Commons Attribution – non-commercial – Distribution On Same Conditions 4.0 international (CC BY-NC-SA 4.0):https://creativecommons.org/licenses/by-nc-sa/4.0/deed.uk
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
