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Innovations in the management of tax gaps in the economy: foreign economic component

Inna Tiutiunyk1, Ihor Kobushko1, Oleksandr Ivaniy2,3, Anna Flaumer4
1. Sumy State University (Ukraine)
2. CAE Elektronik GmbH (Germany)
3. Institute of Management Accountants (USA)
4. Kolping Academy (Germany)
112 - 125
Cite as:
Tiutiunyk, I., Kobushko, I., Ivaniy, O., & Flaumer, A. (2019). Innovations in the Management of Tax Gaps in the Economy: Foreign Economic Component. Marketing and Management of Innovations, 3, 112-125. http://doi.org/10.21272/mmi.2019.3-09


Modern world transformational transitions occur under the influence of exogenous and endogenous factors, which, on the one hand, serve as stimulators of these processes, and, on the other hand, deepen imbalances in the country. One of the most influential factors for low- and middle-income countries is the economy shadowing. These are illegal financial transactions that hold back the investment and innovation development of the country, decreasing the pace of its social and economic development. Building an effective policy of neutralization and minimization of the influence of these factors is possible only if there is evidence-based research of all channels of income concealment and determination of the volume of each of them. Taking into account the low effectiveness of traditional approaches to managing the economy shadowing, the application of innovative evaluation methods based on the determination of the volume of tax gaps in the economy can serve as a ground for increasing the efficiency of the existing tools of public administration in this area. This article summarizes the arguments and counter-arguments within the framework of scientific discussion on the estimation of the volume of tax gaps in the economy in the context of the foreign economic activity of the country as one of the tools for minimizing tax liabilities. Systematizing these scientific developments on the definite problem has shown that among scientists there is no consensus on the role of tax gaps in the economy and their interrelation with foreign economic activity of the country, which significantly updates the need for further empirical research in this area, aimed at determining the volume of tax gaps by the export-import activity and their influence on indicators of economic development of the country. The research is based on the use of the modified Grubel-Lloyd formula (which allows determining the index of asynchronous export-import activity in the retrospective dynamics) and indicators of the level of asynchronous export-import activity by the partner countries. The study subject is the countries with the highest (Georgia), medium (Turkey, Cyprus, Solomon Islands) and the lowest (Japan, Austria, United States) levels of economy shadowing, which allows taking a more thorough and objective decision on the effect of asynchronous export and import activity on the volume of tax gaps in the economy, and its dependence on the level of shadowing in the country for 2013-2017. The paper presents the results of the empirical analysis of the volume gap of foreign economic activity on the example of Ukraine and its trading partners, which has shown that the highest index of asynchrony is peculiar to countries with average levels of shadowing – Cyprus, Solomon Islands, and the lowest – with the participation of countries with low level of shadowing. At the same time, it has been determined that one of the highest asynchronous indexes is observed with the participation of offshore countries. The study empirically confirms and theoretically proves that the foreign economic component plays a significant role in the processes of economic development of the country, and the number of hidden tax payments, due to these transactions, occupy about 1% of the country's GDP (gross domestic product). The results of the research may be useful for the relevant executive authorities in developing measures to prevent income shadowing in the context of export-import operations.

economy shadowing, export operations, import operations, tax gap, asynchrony of foreign economic activity, innovative approaches of the economy unshadowing

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