THE IMPACT OF EXTERNAL FACTORS ON ACCOUNTING AND PAYROLL REPORTING

Abstract

The research addresses the dynamic and critical nature of payroll accounting as an integral part of enterprise management and administration. Payroll accounting not only ensures compliance with labor laws and the accuracy of financial reports but also serves as a vital tool for providing financial and non-financial data that inform managerial decisions. External factors, including changes in labor, tax, and financial legislation, significantly influence payroll accounting practices, creating challenges such as the risk of errors and the need for policy adaptation. The study highlights the significant impact of cyclical legislative changes, such as modifications to income tax rates, social security contributions, and reporting requirements, on payroll accounting. These changes affect both theoretical and practical aspects of accounting, emphasizing the necessity for robust organizational and methodological approaches, including the use of reliable software solutions to process large volumes of data efficiently. The research underscores the dependency of payroll accounting on external reporting systems and the implications of insufficient software updates and support, which can lead to delays, errors, and increased workload for accounting professionals. The article also reviews the effectiveness of Ukraine’s taxation system, particularly the proposed shift from a proportional to a progressive income tax model as outlined in the National Revenue Strategy to 2030. While progressive taxation aims to enhance equity, its fiscal potential may be limited due to the concentration of wages around the average income level. The study evaluates the administrative burden of frequent legislative changes, exploring their destabilizing effects on payroll and general accounting systems. It concludes by calling for strategic reforms to stabilize the tax framework and improve the efficiency of payroll accounting practices, thus ensuring better compliance, reduced risks, and optimized resource allocation. One of the reasons for the low effectiveness of payroll tax reform is the favourable conditions for systemic businesses to use the simplified taxation system by registering employees as individual entrepreneurs. This allows for the replacement of real labour income with entrepreneurial income in order to reduce the tax burden.