Business taxation: a transaction cost theory perspective

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Business taxation: a transaction cost theory perspective

The social and economic development of any society depends to a great extent on the effectiveness and the efficiency of the national tax system. Problems in the sphere of taxation may create substantial obstacles to business development, obstruct investment processes, in particular by deterring foreign investors, and thus impede economic growth. On the other hand, successful reforms of the tax system may make a country an attractive investment destination both for foreign and domestic investors and create favorable conditions for sustainable economic growth.

To develop an effective and efficient tax system, one must have a clear and profound understanding of the economic essence of taxes and taxation-related phenomena. Taking into account that taxes play multiple roles in the economy and taxation is a multidimensional phenomenon, they can be studied from different perspectives, within different methodological frameworks. One of the promising approaches to studying economic phenomena is the transaction cost theory approach, which is part of a wider fast-growing interdisciplinary field - new institutional economics.

The idea, although not the term, of transaction costs was first introduced by Coase in the late 30s. According to Coase (1937), there exists «a cost of using the price mechanism», which includes «that of discovering what the relevant prices are,… the costs of negotiating and concluding a separate contract for each exchange transaction» (p. 390-391). Despite the early introduction of the idea, it was not until the 70s that the concept of transaction costs was taken up and turned into a useful analytical tool by Williamson, Arrow, Alchian, Demsetz (Klaes, 2000).

Transaction costs must be distinguished from production costs. Polski (2003) defines transaction costs as the sum of the costs associated with exchange and contracting activities and points out that they are distinct from the costs of producing goods and services which have a fundamental economic value. In fact, there are plenty of different definitions of transaction costs. Some authors treat this concept very broadly, making transaction costs a catch-all term. For example, according to Arrow (1969), transaction costs are the costs of running the economic system. Such broad interpretation of transaction costs expands the scope of economic and social phenomena that can be analyzed using this concept.

Indeed, transaction cost theory has a great potential for explaining a wide range of social phenomena and has been successfully applied to the analysis of government regulation of business activities. De Soto's path-breaking ideas on the costs of formality, i.e. costs associated with operation within the formal sector of an economy, have attracted much attention to the problem of the costliness of interactions between business and government, spurred studies on the favorability of the regulatory environment for business development and incentives for businesses to stay legal or, on the contrary, to go informal. In his famous book «The other path» De Soto (1989) analyzes the roots of the informal economy in Peru. He shows that it is high costs of business legalization that lead to the emergence of a large informal (illegal) business sector in the Peruvian economy. De Soto proposes a classification of costs on the basis of where they are incurred - in the legal economy or illegal one. The costs related to the operation within the legal sector are called the price of obeying the law and reflect how costly a law-abiding behavior is. The other group of costs constitutes the price of illegality and comprises costs that are generated as a result of an informal status of business (De Soto, 1989). Thus, when choosing between getting legal status and operating in the shadows, businesses weigh advantages and disadvantages of both options in terms of costs. Although de Soto does not use the term «transaction costs» because relations between business and government in the regulatory sphere do not belong to market transactions for which the term had been originally applied, his ideas led to extending the concept of transaction costs to contracts in the non-market sphere, in particular to business-government interactions in the regulatory sphere, which possess all the inherent characteristics of contractual relations.

Transaction costs incurred by businesses, which arise from the interaction with government agencies, can be rather high, making the regulatory environment non-conducive to business development, reducing incentives for entrepreneurship and/or giving rise to an informal (shadow) sector. Viewing the obstacles to business development through the lens of transaction cost theory helps better understand the nature and scope of problems, devise and implement effective regulatory policies.

To improve a regulatory environment, it is not enough to have a conceptual framework and understand the origin of problems qualitatively. A. Benham and L. Benham (2000) have pointed out the necessity of empirical studies of transaction costs - their structure and magnitude, in particular measuring costs arising due to the government regulation of business. A lot of empirical research has been done to measure transaction costs related to different aspects of business regulation, including country-specific studies (e.g. Zylbersztajn et al., 2007; Nashchekina & Timoshenkov, 2004, 2006) and cross-country comparisons (e.g. the Doing Business and the Enterprise Surveys projects of the World Bank Group).

Government regulation of business has different dimensions, one of which is business taxation. Transaction costs theory can be applied both to explain the economic meaning of taxes and to assess the efficiency of business-government interactions in the tax sphere.

Transaction costs in the tax sphere have been studied by Pope (1998), Eichfelder and Vaillancourt (2014, 2016), Coolidge (2012), to name just a few. It should be noted that the authors often avoid using the term «transaction costs», however, what they examine and measure are the costs of business-government interactions in the tax sphere. Most studies focus on the costs incurred by business - the costs related to compliance with tax regulations, whereas there are other aspects of taxation which can be analyzed within the framework of transaction costs theory.

The purpose of this paper is to show the relevance of using the transaction cost theory approach for explaining the economic essence of taxes as well as for analyzing various economic and social phenomena in the tax sphere and the costs arising from the interaction between business and government with regard to taxation. We will also summarize factors that affect the level of tax transaction costs using the data from comparative cross-country studies as well as in-depth studies of the Ukrainian tax system; discuss methodological issues in the tax transaction cost measurement and implications of a transaction cost approach for the development of an effective and efficient tax system.

1. Taxes as transaction costs. We will start with less obvious and even disputable at first glance application of transaction cost theory to the tax-related issues, which consists in treating taxes themselves as transaction costs incurred by business. Returning to Arrow's (1969) definition of transaction costs («the costs of running the economic system»), we can assume that transaction costs include everything but for production costs. Since such a broad interpretation of transaction costs opens the way for «transaction cost imperialism», let us justify the relevance of treating taxes as transactions costs.

Since below we will use the concept of transaction costs to describe quite different aspect of business taxation, to avoid confusion, let us clarify the meanings of terms. First, by taxes we mean the amounts of money businesses pay to the government. Second, transaction costs (costs of exchange) incurred by business can be related to market transactions, i.e. trading of goods or services through market, and non-market transactions, which in our case represent contractual relations between business and government associated with business taxation (paying/collecting taxes). In this paragraph we will not discuss the transaction costs arising from business-government interactions but will show why taxes can be interpreted as part of transaction costs associated with business activities (market transactions).

It is known that the effectiveness and efficiency of business activities in any economy depend to a great extent on transaction costs that accompany market transactions. These costs are comprised of the costs of searching for information about potential business partners, prices, etc, costs of negotiating contract terms, costs of monitoring the performances of the parties within the contract and costs of enforcing the contract terms.

Government has a potential for affecting (reducing) the level of transaction costs in an economy by providing so-called transaction goods which belong to public goods. More specifically, government creates a formal institutional framework, in which market transactions take place. In particular, it ensures the registration and protection of property rights, provides information on property owners. It is important because business contracts often involve property rights transfer, and if those rights are not clearly defined and safely protected, a transaction may not occur because transaction costs (e.g. enforcement costs) anticipated by potential parties to the transaction are too high. Government also provides legal instruments for contract enforcement. In the absence of such legal support, the magnitude of transaction costs for business would be much higher and a large number of potentially mutually beneficial transactions would never take place. Thus, operation within the formal institutional framework may be associated for business with lower transaction costs.

Access to transaction goods is granted only to organizations that function in the formal sector, i.e. are properly registered and pay taxes. Actually, taxes can be treated as the payment for transaction goods (Kuzminov et al., 2006). Under these circumstances transaction goods can be considered to be excludable goods, i.e. if a business is not registered as a taxpayer, it is excluded from the use of transaction goods ensuring the protection of its property rights in contractual relations with other businesses, enforcement of contract terms and other benefits. Thus, taxes, as the price paid for transaction goods, can be regarded as transaction costs of business, similar to a fee paid to a lawyer (for drawing a contract or for providing legal assistance in the conflict resolution) or to an auditor (for checking the financial position of a potential business partner).

Government grants legal status to businesses. If legal status is required to enter some transactions or can help lower transaction costs, it makes sense for businesses to acquire it in return for paying taxes. For example, many buyers, private or corporate, prefer to purchase goods from a legally registered firm at a higher price than from an entrepreneur with no legal status at a lower price. In the former case buyers feel safer because if a conflict with a seller arises, they can use official means of contract enforcement and protect their interests. Thus, ceteris paribus it is more beneficial for a seller to have legal status. The payment for the legal status can be treated as transaction cost.

A proper registration as a taxpayer can be viewed as an «entrance ticket» to the legal infrastructure of the contractual environment. To stay there, a business must pay taxes - a regular «membership fee» which depends on the scope of the business's activities or benefits it derives from working within that infrastructure.

As Smith (1776) states: «The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state». For our discussion the key phrase is «under the protection of the state» (p. 825). Government creates conditions and provides protection for business activities which, in turn generate certain revenues. Protection is directly related to transaction costs, primarily to enforcement costs that business bears in market transactions. So, operating under the protection of government business must pay for such protection and this payment is part of the overall transaction costs.

The non-market contract between the government and a business does not assume bargaining over the price (the amount of tax) and quality of transaction goods provided by the government, at least in the short run. In the long run the terms of that contract can be changed as a result of changes in a macroeconomic (fiscal) policy or regulatory reforms.

Businesses pay taxes if they prefer to stay in the legal environment. If the costs of staying there are higher than the costs of operating in the shadows, a business may consider retreating to the informal sector with its own infrastructure and alternative ways of contract enforcement. For example, when the effectiveness of the legal means of contract enforcement is low, i.e. the legal means of contract enforcement do not help reduce the costs of transacting between businesses, the incentives for staying in the formal sector will also be low. However, benefits of staying in the official economy are not reduced to contract enforcement. If a business leaves the legal framework for the shadow sector, it has to keep low profile, which limits for this business the possibilities of development and brand promotion, import/export operations, access to financial resources and so on.

At the same time, even if the cost of informality is too high, the payment for access to the formal economy cannot be raised indefinitely. The price business is able to pay for transaction goods depends on the taxable capacity of business, defined as the maximum amount business can pay to support the government without inflicting damage on the productive capacity and desire to produce.

Whether the tax capacity is fully used, underused or tax collection exceeds the tax capacity can be judged from another indicator - tax effort, which is calculated as the actual tax revenue divided by tax capacity. If it is equal to one, then the tax capacity is fully utilized. If it is larger than one, then the tax burden imposed on business goes beyond the capacity; if it is smaller, the economy has reserves and can increase tax collection. Smith (1776) warns policy makers against unreasonably high level of tax effort: «It may obstruct the industry of the people, and discourage them from applying to certain branches of business» (p. 827).

Businesses may try to find compromise between staying legal and paying too high price for it. Being properly registered as taxpayers, they pay not the full amount of taxes but part of it, hiding their profits, understating their revenues and the number of employees, overstating costs etc. It leads to a free-rider problem, when those who do not pay the full price cannot be excluded from the consumption of transaction goods. Insufficient payment may result in the deterioration of the quality or underproduction of transaction goods (Kuzminov et al., 2006).

Globalization and development of multinational corporations have raised a number of issues related to the distribution of tax revenues among the countries in which a multinational business entity operates. These issues are addressed in The Action Plan on Base Erosion and Profit Shifting (BEPS) (OECD, 2013) that contains 15 actions concerning tax transparency, accountability, information exchange and other potential changes to international taxation. The action plan emphasizes the need for international agreement and cooperation to combat tax avoidance at a transnational level «that exploits gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations» (OECD, 2017). Shifting profits to countries with more favorable tax legislation to pay less in taxes is a variant of free-riding, i.e. using transaction goods without paying for the use. Since 2017, Ukraine has become an official member of the Inclusive Framework on BEPS.

Treating taxes as transaction costs leads to the following conclusion. To create incentives for business to pay taxes, government should provide adequate-quality transaction goods, which can effectively reduce transaction costs in the economy so that the benefits of staying legal exceed the costs business pays for it.

2. Costs of interactions between business and government in the tax sphere. In this paragraph we will look at tax-related phenomena from a different angle and focus on the transaction costs accompanying the relations between business and government rather than on the amount of taxes paid by business.

Economic exchanges, both market and non-market ones, are associated with transaction costs. The business-government interactions in the tax sphere are no exception, and transaction cost theory can be used to explain and analyze the efficiency of those interactions.

In contractual relations usually both parties incur transaction costs. That is why the total tax transaction costs can be divided into administrative costs and compliance costs (Pope, 1998; United Nations, & CIAT, 2014). The administrative costs are borne by tax administrators and connected with providing and maintaining a mechanism for collecting taxes, enforcing the compliance of taxpayers and so on. The compliance costs are the costs incurred by taxpayers. They include the resources spent on the compliance with the existing tax regulations and dealing with tax authorities.

Pope (1998) distinguishes between monetary and non-monetary compliance costs. The former can always be expressed in monetary terms, including the employees' time spent on tax-related activities, which can be converted into monetary units more or less accurately. Monetary costs can be further divided into internal (incurred inside a business organization) and external (payments to external consultants).

Non-monetary costs are more difficult, if not impossible, to estimate because they are often of psychological nature - stress, dissatisfaction with work. The idea about the existence of non-monetary costs can be traced back to Smith (1776), who stated that «…by subjecting the people to the frequent visits and the odious examination of the tax-gatherers, it may expose them to much unnecessary trouble, vexation, and oppression; and though vexation is not, strictly speaking, expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it» (p. 827-828).

A high tax burden may discourage entrepreneurs from doing business or at least from operating in the formal sector of an economy. However, even if the tax rates are adequate, entrepreneurs still may be deterred from working within the official economy because of a high level of compliance costs.

Whether business will be willing to comply depends on a great number of factors, which can be divided into economic and non-economic ones. The classifications of factors are given in (Pope, 1998; United Nations, & CIAT, 2014; Barbuta, 2011). Among economic factors are tax rates, the severity of punishment for non-compliance combined with the probability that it will be detected by tax authorities, the magnitude of compliance costs. Compliance costs will be higher if the requirements are excessive, if the tax regulations are sophisticated, unclear, ambiguous, frequently changing, if procedures stipulated by the tax legislation are time-consuming, if the access to information on the tax legislation is hampered.

However, economic factors alone cannot fully explain tax compliance behavior. For example, the tax burden in Croatia is less than half of that in Germany and the compliance costs for the two countries are almost the same (The World Bank Group, & PwC, 2017a), however the size of the Croatian shadow economy, which is directly related to the incidence of tax evasion (the most common form of non-compliance), is twice as large as the German one (Schneider, 2015). The factors affecting compliance with tax regulations can also be of socio-cultural origin, including the law-obedience of society members, path dependence in tax compliance, the dominating in a society attitudes to tax evasion (condemnation, tolerance, understanding, justification etc.), the attitude toward the government (trust, respect, reciprocity etc.). Altogether all those factors determine tax morale, which is usually understood as intrinsic motivation to pay taxes.

Tax morale can also depend on how efficiently collected taxes are used by the government. If taxes are used inefficiently and government services are of low quality, entrepreneurs may perceive the situation as unfair and be discouraged from paying taxes. As a result tax morale will decrease. Tax morale is also negatively affected by corruption in the regulatory sphere.

A large tax burden and high compliance costs combined with low tax morale almost certainly will lead to a low propensity of taxpayers to comply with tax regulations and as a result to an increase in the administrative costs, in particular the monitoring and enforcement costs. The introduction of simplified and transparent tax procedures may lead to the simultaneous reduction in administrative costs and compliance costs. Pope (1998) points out that administrative costs and compliance costs may be complementary to each other but they can also be inversely related, when transferred from one party to the other. The simultaneous reduction in both types of costs releases societal resources, which can be used for productive activities instead of being dissipated.

3. Measuring tax transaction costs. If transaction costs are «the costs of running an economic system» (Arrow, 1969), a high level of these costs may mean that the system operates inefficiently. The implications are low incentives for entrepreneurship and, as a result, underutilization of the entrepreneurial potential of the society.

The resources spent on creating exchange mechanisms and governance structures for particular transactions have their opportunity cost. If a great deal of resources is dissipated in the form of transaction costs, special measures must be taken by the policy makers to spare societal resources for more productive uses. To devise a sound policy for improving the institutional environment, providing mechanisms for facilitating economic exchanges and thus reducing transaction costs, it is necessary to have a clear picture of the current level of transaction costs, i.e. to be able to measure those costs using some standard methodology.

While there are studies in which transaction costs are measured for the whole economy (e.g. Wallis, & North, 1986), most studies deal with transaction costs related to particular transactions, either market or non-market ones. Showing the importance of empirical measurement of transaction costs, A. Benham and L. Benham (2000) state that to examine transaction costs empirically, it is necessary to have «a standardized methodology which specifies particular transactions in terms of the form of exchange, the good to be obtained, the characteristics of the individual, and the setting». The contractual relations between business and government in the tax sphere are an example of a non-market transaction which lends itself to studying in terms of transaction costs.

There have been quite a few studies evaluating tax systems and measuring tax transaction costs. At the same time the number of studies of administrative costs is very limited, while the research on compliance costs is rather extensive. Measuring compliance costs represents a more challenging task than measuring administrative costs. The latter are equal to the operating budget of a national tax administration. They can be measured in monetary units but for comparison purposes it is more convenient to measure them as percentage of GDP (United Nations, & CIAT, 2014).

Most studies assessing the conduciveness of tax systems to business development focus on both tax burden and compliance costs incurred by businesses. Some studies are related to a certain country and examine its tax system and the costs it imposes on business in depth (United Nations, & CIAT, 2014; IFC, 2009). Other studies cover a number of economies and are aimed at comparing their tax systems (The World Bank Group, & PwC, 2017a; Evans et al., 2014). The major problem with cross-country studies is that tax systems in different countries differ in many respects, being shaped by a great number of economic, institutional, historical, cultural and other factors, which makes comparisons inaccurate. In some cases, to yield the most accurate results, the research methodology must be country-specific because respondents in different countries demonstrate different degree of cooperation and willingness to disclose information, especially when it goes about tax evasion, corruption practices and other sensitive issues (Nashchekina, & Timoshenkov, 2004). However, for international comparative studies a unified measurement methodology must be used. There are different ways to overcome this problem. For example, a study may concentrate on broadly comparable economies (Evans et al., 2014), or be conducted for a hypothetical case study company with strictly defined parameters, using experts to estimate its tax compliance costs (The World Bank Group, & PwC, 2017a). Eichfelder and Vaillancourt (2014) give a comprehensive overview of research on tax compliance costs starting from the mid-80s. Methodological issues related to the measurement of tax compliance cost are also discussed in other studies (e.g. Coolidge, 2012; European Commission, 2013).

Among the most well-known and highly cited empirical studies of business environments, including tax systems, are the World Bank's Doing Business (DB) project and the joint annual publication Paying Taxes (PT) by the World Bank Group and PricewaterhouseCoopers (PwC). The DB project, launched in 2002, is aimed at assessing the relative ease of doing business in a certain country as compared with others by measuring indicators related to 11 areas of business life, one of which is Paying Taxes. Annual PT reports are based on DB data for the PT indicator, but provide more comprehensive comparative analysis of tax systems, that is why we will refer mostly to PT reports. DB and PT reports show not only the relative favorability of business environments for a given year but also the dynamics of the major indicators over time. The recent DB and PT surveys (The World Bank Group, 2017a; The World Bank Group, & PwC, 2017a) provide rankings of 190 economies by the overall ease of doing business and by the ease of paying taxes respectively, 1 denoting the most favorable and 190 the least favorable business environment. The overall rank of Ukraine in DB 2017 survey is 80.

The aggregate Paying Taxes indicator is composed of four sub-indicators, including the number of tax payments per year, the total tax rate as a percentage of profit, the time spent on compliance with procedures during the year, and the recently added indicator reflecting post-filing processes, i.e. processes that occur after a firm complies with its regular tax obligations. In particular, the fourth subindicator measures the time it takes to get a value added tax refund, deal with an insignificant mistake on a corporate tax return that can potentially trigger an audit and good practices with administrative appeals process. Each of the sub-indicators is calculated for a hypothetical company on the basis of expert evaluations according to a special methodology described in Paying Taxes Report (The World Bank Group, & PwC, 2017a).

As is seen, essentially the PT survey is a study of tax burden and tax transaction costs on business side, i.e. compliance costs. Specifically, three out of four subindicators (the number of payments, time to comply and post-filing procedures) are related to compliance costs which accompany the transaction between business and government in connection with paying taxes. The remaining fourth sub-indicator (total tax rate) reflects tax burden. Although, as we showed above, taxes themselves can also be treated as transaction costs of business, to avoid confusion, in this paragraph we will not mix different types of transaction costs - transaction costs related to market contracts and transaction costs arising from the interaction between business and government in the tax sphere.

Although the process of transaction cost assessment in the PT study includes measuring some absolute values like the number of hours spent by businesses on certain activities, the main idea of the study is to show how different countries perform relative to other countries. For this purpose, for each four sub-indicators as well as for the performance of a country on the aggregate PT indicator, the distance to frontier is measured, which shows how close the country is to the best performance on the corresponding indicator. To calculate the distance to frontier, values of indicators are rescaled from the units in which they are measured to a common unit. The detailed description of the methodology is given in Paying Taxes (The World Bank Group, & PwC, 2017a).

A change in the rank of a certain economy over time reflects only a shift in the position of that economy relative to other economies. The absence of change in the rank does not necessarily mean the absence of progress. If other countries have improved their tax systems too, the rank of the economy in question may stay unchanged even if its tax system has been improved. So, it is important to observe the values of sub-indicators for the country over years to judge how much progress, if any, has been made.

The introduction of the fourth sub-indicator in the Doing Business 2017 (The World Bank Group, 2017a) survey has changed the rankings for some countries dramatically. For example, Saudi Arabia, which had the 3rd rank in the absence of the post-filing procedures, has been shifted down to the 69^th position.

Indeed, the post-filing procedures and associated transaction costs can vary significantly across countries. For instance, mistakes made in a corporate income tax return discovered by a business after filing the return with the tax authority may have different consequences in different countries. In Estonia and Portugal it suffices to prepare and submit an amended return and make payments electronically. In contrast, in Peru such a mistake would trigger a comprehensive field tax audit requiring interaction with the auditor for approximately six weeks, after which the firm would wait for the final assessment from the auditor for another seven weeks (The World Bank Group, & PwC, 2017a).

The overall rank of Ukraine according to the PT 2017 survey, which relates to the calendar year ended on December 31, 2015, is 84. Comparison with earlier years will be inaccurate because of the recent change in the ranking methodology, i.e. addition of the fourth sub-indicator. It was estimated that if this sub-indicator had been used in the PT 2016 survey (reflecting the situation in the year 2014), Ukraine's rank would be 83. However, if only three original sub-indicators were used in the PT 2017 survey, Ukraine would occupy the 111^th position, which is worse than the 107^th position in the PT 2016 ranking.

As far as separate sub-indicators are concerned, Ukraine occupies low positions in the regional (Central Asia and Eastern Europe) ranking on total tax rate - the third highest total tax rate after Belarus and Tajikistan, and time to comply with tax requirements - the second longest time (356 hours annually). At the same time Ukraine performs rather well on the remaining two sub-indicators. Ukraine has the smallest number of tax payments in the region (sharing this best result with Georgia) and occupies a midway position on the fourth sub-indicator related to post-filing procedures.

Although there is a global trend toward lower both tax burden and tax compliance costs over time (2004-2015) (The World Bank Group, &PwC, 2017), this trend is the result of averaging over a large number of economies, whereas some economies show an opposite trend. The compliance time varies largely across economies. For example, in Brazil the compliance time remained at 2600 hours over 10 years and only in 2015 it dropped by 652 hours reaching 2038 hours. For comparison, the compliance time in Ukraine was 356 hours in 2015, while for the United Arab Emirates it amounted to mere 12 hours a year.

On a global scale, over the last ten years the tax compliance time exhibits a downward trend for all major taxes. This can be attributed partially to the development of electronic tax filing systems and systems of payments.

The number of tax payments also shows a declining trend over ten years. A substantial contribution to this trend in 2014-2015 was made by the Central Asian and Eastern European countries, mostly due to the development of electronic filing and payment systems, because according to the methodology of calculating the number of tax payments, the value of this sub-indicator depends significantly on the possibility of filing tax returns and making payments electronically.

Ukraine follows all the above mentioned global trends. Table 1 shows the dynamics of the aggregate PT indicator and three sub-indicators for Ukraine (the fourth sub-indicator is available only for 2015, so the dynamics cannot be traced) dropped from 147 in 2008 to 5 in 2013, first of all due to switching to electronic tax systems. A significant progress has been made in the reduction of the time business has to spend on the compliance with existing procedures - this time has been decreased from 2185 hours per year to less than 360. The reduction in the total tax rate estimated as percentage of commercial profit was not as impressive as the decrease in the other sub-indicators; however it exhibits rather steady trend to decline with minor fluctuations. Thus, Ukraine shows progress in combating excessive administrative and financial burden on business.

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Paying Taxes ranking and scores on the overall distance to frontier and three sub-indicators for Ukraine (2004-2015)