Multiplicative Analysis of the Fiscal and Investment Determinants of Processing Industry Modernisation

Abstract

Background. The technical re-equipment of industry requires effective support levers, among which a multiplicative model for assessing the impact of fiscal regulation of equipment imports on the modernisation of the processing industry is of special importance.

Purpose. The study aims to implement a multiplicative model to assess the impact of instruments for the fiscal regulation of equipment imports on the efficiency of industrial development, the compensatory potential of reverse tax revenues, and the socio-economic multiplier of employment.

Findings. The study employs a multiplicative model to derive an aggregate indicator of industrial development efficiency and to conduct an analysis based on data from 2022 to 2025 in Ukraine, with forecasts through 2030 obtained via extrapolation. The effects indicate a structural shift in Ukraine’s imports by 2030, with the share of the investment-technology group exceeding 27%. The aggregate efficiency indicator shows steady growth, rising from a low level in 2022–2023 (Edev = 0.200-0.262) to a moderate level in 2025 (Edev = 0.376) and reaching a stable level of 0.396 by 2030 under the baseline fiscal regime. It was determined that the complete abolition of duties would lead to a fiscal gap of USD 5.9 billion in 2025, while in 2030, budget losses exceeding USD 10 billion may be partially compensated by reverse tax revenues. The socio-economic multiplier confirmed that reinvestment of the released funds would ensure the annual creation of jobs amounting to 10.3–15.5% of actual employment in 2025 over 2026–2030, with the projected employment capacity of the total industrial potential reaching 3.41 million workers, compared with 1.34 million employees in 2025.

Implications. The feasibility of introducing preferential customs and tax regimes is supported by the reverse fiscal multiplier effect, which, through job creation, may partially offset the primary budget losses in the medium term. The abolition of import duties on equipment has the potential to become budget-neutral due to reverse tax revenues, which provides grounds for revising customs and tariff policies. The proposed multiplicative model can be expanded to account for regional labour market disparities and the effects of labour reallocation between industries.