Fiscal Incidence in Ukraine: A Commitment to Equity Analysis

Abstract

The paper employs the Commitment to Equity framework to present a first attempt at a comprehensive fiscal incidence analysis for Ukraine, encompassing the revenue and expenditures components of the fiscal system, including direct and indirect taxes, as well as direct, indirect, and in-kind transfers. The fiscal system in Ukraine has high redistribution effects, decreasing the Gini inequality index by 21 percentage points, and the official measure of poverty incidence by 27.6 percentage points (considering all fiscal interventions including in-kind transfers). As in many other countries in the region, pensions are the main contributor to the redistribution effect of fiscal policy. However, Ukraine stands out due to the relatively high equalizing effect of direct transfers. Fiscal policy in Ukraine is pro-poor, with the lowest income decile benefiting the most. Overall, 60 percent of the population of Ukraine are net recipients from the fiscal system, the main categories of recipients being households with two or more children, single-parent households, and retirees.