Importance The current fiscal policy of the State with regard to the agrarian sector has a number of shortcomings preventing to create a favorable institutional environment in the industry for boosting an effective and competitive agricultural production. Objectives The purpose of the study is to designate general areas of reforming the Ukrainian taxation system for agricultural producers under termination of special tax regimes for VAT in the industry. Methods In the study, I apply economic and statistical methods of research, in particular, monographic, comparison, tabular, and scientific generalization. Results I refined methodological approaches to determining the fixed fee in case of applying a compensation rate scheme. It is the most common practice of VAT rules for farmers in Europe. I also calculated and justified optimal fixed fees ensuring the compensation of input VAT (on the farms of the Cherkassy region case). Based on the results of the calculations, the paper underpins the optimal compensation rates for the entire agricultural sector. Conclusions and Relevance The findings show that the Ukrainian system of taxation of agricultural producers needs to be reformed in the context of termination of the special tax regimes of VAT collection in the industry and its phased convergence with the generally accepted tax practice.
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