Investment allocation in Slovakia and Ukraine in terms of effective corporate tax rates

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Since countries differ in their traditions, cultures or different tax systems, investment allocation can be a difficult task for some investors. Effective tax rates present indicators of the real corporate tax burden and consider the impact of all legislation elements. This paper deals with the effective taxation of selected intangible and tangible assets. The analysis will be processed by calculating average and marginal tax rates (EATR and EMTR) according to the methodology of the Centre for European Economic Research (ZEW). Then, the relationship between these two tax rates was calculated, and the relationship was identified that evaluates the most optimal criteria between location, amount and source of investment financing. The analyzed period is the year 2020. The analysis is a quantification of the amount of the tax rates for a hypothetical investment. The next step in the analysis is a calculation of the tax shield, which expresses tax saving of investment and the economic income of project, including taxation, and means financial benefit for an investor. The results have shown that Ukraine is a better choice for the investor, as this country reached lower values of effective tax rates for all other types of assets, except land, than Slovakia. In the case of own funds financing, there is a difference between 10.7% and 11.6%, and in the case of debt financing, the difference ranged from 10.8% to 11.7%. The exception was land, the rates for which were higher than in Slovakia by 0.70%. This paper has confirmed the research hypothesis that Ukraine is a more tax-attractive country than Slovakia.

Acknowledgment
This research was supported by VEGA project No. 1/0430/19 “Investment decision-making of investors in the context of effective corporate taxation”.

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    • Figure 1. Development of tax revenues in Slovakia
    • Figure 2. Development of tax revenues in Ukraine
    • Table 1. Input assets for Slovakia (SK) and Ukraine (UA)
    • Table 2. Calculated values of EATR and EMTR
    • Conceptualization
      Alena Andrejovska
    • Data curation
      Alena Andrejovska, Oksana Tulai
    • Methodology
      Alena Andrejovska
    • Supervision
      Alena Andrejovska
    • Visualization
      Alena Andrejovska, Oksana Tulai
    • Writing – original draft
      Alena Andrejovska
    • Formal Analysis
      Jozef Glova
    • Project administration
      Jozef Glova
    • Writing – review & editing
      Jozef Glova
    • Validation
      Oksana Tulai