Tax burden as a driver of the main state functions financing: cross-country analysis

Abstract

The tax burden is an important indicator of the economic policy of the state, ensuring the performance of its main functions, influencing economic growth, investments and the welfare of the population. At the same time, different states apply different types of tax policy, determining the level of redistribution of the country's GDP through taxes and changing the level of state financing of various areas of socio-economic development. The purpose of the article is to study the specificity of the relationship between the tax burden and the financing of key tasks of state policy. The article analyzes the level and structure of the tax burden in Ukraine and EU countries in recent years. The basis of the study was data from 28 countries for the period 2010-2022. Based on the results of the statistical analysis, key differences in the main taxes forming the tax burden, changes in corporate and individual taxes, and features of the structure of the tax burden were determined. It was found that Ukraine has an average level of tax burden, compared to other European countries, which is growing during 2010-2022, which corresponds to the trend of most analyzed countries. On the other hand, it was found that compared to other European countries, Ukraine has an average level of funding for education, a low level of funding for health care and spending on research and development, as well as a high level of spending on defense. Using correlation analysis tools and panel regression modeling, the relationship between the tax burden and the level of spending on public needs was investigated. The results of the evaluation showed that the tax burden has a statistically significant relationship with the level of public health care funding and spending on research and development. The revealed relationship is direct, which indicates the increase in state financing of the specified areas as a result of the increase in tax revenues. At the same time, a statistically significant relationship between the tax burden and spending of state funds on education and defense has not been confirmed. This indicates the fact that in order to ensure the growth of state financing of the specified areas, funds from other sources should be attracted, in addition to tax revenues. The obtained results can be used in the process of formation and adjustment of the budget and tax policy of the state, determination of the budget expenditure strategy.