THE EFFECT OF TAX MECHANISM ON THE INVESTMENT ACTIVITY OF COMPANIES

Abstract

The socio-economic development of the country, sustainable economic growth, income growth and improvement of living conditions depend on the investment volume and activity. Developing countries adopt policies aimed at creating an attractive investment climate in the national economy. The impact of tax incentives and tax burdens on the investment activity of enterprises is of financial importance since the effective tax reforms carried out by states will encourage investment. The article reviews the impact of the taxation mechanism on investment activities and ways to stimulate tax benefits. The effect of taxes on enterprise costs, the volume of investments in the country, and factors negatively affecting the investment activity of the enterprises have been studied on the basis of the econometric method. The results were obtained using regression and correlation methods based on enterprise data. At the same time, it was established that taxes paid by enterprises are highly dependent on the total expenses of enterprises. This means that taxes paid have a significant impact on the costs of the enterprise. When analyzing tax revenues in relation to the gross domestic product, a negative correlation is observed, that is, increasing investment due to the fall in tax revenues. As a result of the study, proposals were developed to strengthen the investment incentives, mainly for innovation, the introduction of tax credit practices in the Tax Code to ensure budget stability while stimulating investment, simplifying tax reporting and reducing the size of the shadow economy in the country. The recommendations presented in the article are based on the analysis and international best practices that can be implemented in the process of tax reform.