PROTECTION OF TAX SOVEREIGNTY OF UKRAINE AND THE EU IN THE CONTEXT OF THE SPREAD OF TRANSFER PRICING AND OFFSHORE JURISDICTIONS

Abstract

Under modern conditions of globalization, the problem of preserving the tax sovereignty of states becomes particularly urgent, as the active use of transfer pricing (TP) and offshore jurisdictions results in significant budget losses and distorts competitive conditions. For Ukraine, this issue acquires additional importance in the context of post-war recovery and the drive towards EU integration, where strengthened international standards in combating aggressive tax planning are in force. The purpose of this article is to identify the key factors influencing the tax sovereignty of Ukraine and EU member states through transfer pricing and offshoring, as well as to develop scientifically grounded recommendations aimed at preventing tax revenue losses in the context of closer alignment with the European tax space and post-war reconstruction. The article analyzes the scale and dynamics of offshore jurisdictions and TP methods used from 2005 to 2024, and evaluates their impact on budget revenues. By employing a multi-faceted approach, it was found that the share of revenues lost in Ukraine due to imperfect TP regulation and capital outflows to offshore jurisdictions is higher than in most EU countries. This is driven by both the lower capacity of supervisory bodies and the absence of a unified methodological approach to calculating losses. It has been established that international initiatives (BEPS, EU directives) and national reforms (Law No. 466, introduction of controlled foreign company rules) can substantially strengthen fiscal control and reduce profit shifting, particularly against the backdrop of intensified tax information exchange among countries. The insufficient harmonization of methods for assessing lost budgetary resources complicates comparisons of the effectiveness of regulatory measures between Ukraine and the EU. Hence, a priority is to develop a shared methodology and to continue harmonizing Ukraine’s legislation with European norms in the field of taxation. This will promote the strengthening of the state’s tax sovereignty, reduce budgetary losses, and foster equal business conditions, which is especially crucial in the course of economic reconstruction.