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Introduction. In modern conditions of fundamental changes in social-economic and political spheres in Ukraine the scientists pay a special attention to issues of effective tax system development. The tax mechanism influences on the formation of revenue part of the budget, which is the main financial base of the state. The tax system contributes to constant and stable budget revenues. Therefore, the analysis of the tax system functioning under the current conditions of the systemic crisis becomes urgent.

Purpose. To ground the analysis of the current problems of Ukrainian tax system functioning; to identify the main ways of their solution.

Methods. The article is based on the general scientific methods: induction, deduction, analysis and synthesis, abstraction, systematic and structural approach to the study of theoretical and practical aspects of effective tax system development in Ukraine.

Results. The analysis of the Ukrainian tax system, its formation and development allowed identifying its serious disadvantages. The tax system instability caused by frequent changes in tax legislation has the negative affect on the business activities. The basis is the fiscal direction of the tax system; the regulating function of the main taxes is not sufficiently identified. The tax system is too cumbersome; calculations of some taxes are unjustifiably complicated. The regulation of modern economic relations requires a flexible tax policy enable to link optimally the national interests and the interests of business, taxpayers. The transition to a market economy causes the necessity of the tax system transformation, as well as the development of methods of taxes calculation and payment.

Originality. The main strategic objectives of the tax reform: increasing the competitiveness of domestic business; legalization of the shadow sector of economy; activation of investment processes; simplicity and clarity of tax rules for business entities; reduction of taxpayers expenses on the accrual and payment of taxes and the state – on their administration; adaptation of Ukraine’s tax legislation to the EU legislation; creation of appropriate conditions for taxpayers’ compliance with tax legislation; introduction of the information-analytical system of the state fiscal service on the national level; automation of taxation processes using modern technologies.

Concluction. The effective formation and further functioning of the tax system requires the development of the most effective cooperation between the state, legal entities and individuals regarding the formation, distribution and use of their income; it is one of the main conditions for the optimal functioning of the economy and finance. Ukraine's further development depends on the effectiveness of the financial strategy, which ensures the welfare of the population, the fulfillment of the state duties and functions. Therefore the stability and economic development of the state depend on its tax policy. One of the main components of financial strategy (at both: state level and enterprise’s level) is a tax strategy enable to meet the modern needs.Reforming the tax system is the most important problem at the stages of market environment forming and creating favorable conditions for reducing tax burden. The tax burden should be reduced gradually to implement the stable budget revenues.

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