The paper considers the farm tax system in Ukraine. It is no secret that Ukraine inherited extremely distorted economic system from the Soviet Union with artificial prices, inefficient firms, impractical legal system, and a numerous economic and administrative barriers for exchange of ideas, technologies and standards. With transforming Ukraine's economy from the plan to market, the reform of the tax system was an enormously important task to encourage private sector to develop and to allow the government to fulfil its tasks in the new market environment. In spite of the desirability to create sustainable tax system for the overall economy, in 1999 Ukrainian Government introduced the fixed agricultural tax and exempted the agriculture from paying VAT. This highly privileged farm tax system expires in 2004. This paper, therefore, considers the option for further farm tax system in Ukraine.
The paper starts with the consideration of main principles of the good taxation with the short inside to the key issues of the tax reform for the economy in transition. Then, the effects of different taxes (income taxes, land and value-added taxes) on the agriculture and its structure are discussed. The description of the current farm tax system in Ukraine is further used to make comprehensive analysis of its impact on the macroeconomic balance in Ukraine, as well as on the agricultural efficiency and long-term competitiveness. The conclusions and policy recommendations concerning the future farm tax system in Ukraine are followed by the Appendix with the international experience of the farm taxation in the United States, the EU and Russia.
Current paper provides a valuable foundation for the tax reform in Ukrainian agriculture, where not only loose branch issues should be taken into account, but rather intersectoral linkages together with the long-term competitiveness of the agricultural producers should be considered.
