Changing Attitudes to Pensions of the Population of Ukraine

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Changing Attitudes to Pensions of the Population of Ukraine

Journal Title: Демографія та соціальна економіка - Year 2013, Vol 20, Issue

Abstract

The article notes that today in Ukraine, in spite of the conducted pension reform, an unsatisfactory situation remains in the system of pension insurance. The challenge of stable funding of Ukrainian pension system budget is still a priority. This article is devoted to the justification of the need for a fundamentally different approach to ensure a stable funding of the Ukrainian pension system budget by changing the main source of its income, that is, a certain percentage taxation of sales (turnover) of enterprises as contributions to the Fund instead of charges of pension contributions from payroll. The authors believe that these changes have some advantages besides budget increase. First of all, it is the independence from the demographic factor changes, and secondly – the possibility of a radical improvement in the overall climate of the remuneration system in the economy. Due to the turnover tax application the new unified social tax (UST) will exempt labor remuneration fund from obligatory social payments. An employer will have the possibility to discard «shadow» wage and increase it as a result. Pension system insurance payments, which today are calculated as a 33,2% tax of workers’ labor remuneration costs, do not have the same influence on sales effectiveness of industries which have different parts of salary expenses in production cost. Today, pension contributions of employers at other equal terms reduce sales profitability due to the labor remuneration fund, and such decline is a variable component which depends on three factors at once: pension payments rate; industry wages share in the «pure» manufacturing cost; «pure» industry manufacturing cost share in sales income. And since in the various industry sectors the last two values are different, the industry influence of the current 33.2% rate of the wage fund is also different. Pension contributions become the payments that hurt the interests of taxpayers of some industries to a greater extent than taxpayers of other industries. On the basis of the conducted analysis of volume of the labor remuneration fund, pension fund payments and product sales volume of engineering and non-ferrous metallurgy industry enterprises, the authors came to the conclusion, that the «labor-intensive» industries are exposed to a kind of «discrimination», since the salary in the «pure» manufacturing costs of their products makes a fairly large percentage. This concerns the enterprises of coal industry, engineering, building materials, light industry, agriculture, transport, communication, construction, housing municipal services. On the other hand, «capital-intensive» oil, petroleum refining, natural gas, pulp and paper, chemical, ferrous and non-ferrous metallurgy industries fall into «hothouse» conditions. Since the first don’t have the possibility to increase wages at the same rate as the latter, then the official fixed three-four times difference between them in wages is not surprising. Moreover, it will only grow with the passage of time. This factor – the base salary from the labor remuneration fund – can become the strongest obstacle to the development of labor-intensive, highly technological and knowledge-intensive industries. And vice versa, the pension turnover tax, which does not depend on the labor remuneration fund in a prime cost, can become the factor that will address the problem of today’s inter-sectoral disproportions. That is, the authors believe that the turnover tax collection at the rate of 5–10% (depending on turnover volume) allows stabilizing enterprise profitability, which will in turn make it possible to liquidate the budget deficit of the Pension Fund of Ukraine and provide it with stable income.

Authors and Affiliations

I. Y. Shklyarska, Y. А. Shklyarsky

Keywords

pension system pension insurance pension reform pension payments budget of the Ukrainian pension system.

EP ID EP287245
DOI 10.15407/dse2013.02.203
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