In order to economic indicators have been growing steadily, a competent tax policy should be implemented by the state. In this case, the budget will be filled in the right amount, and enterprises will take a guide to expand production and attract investment. But in the process of implementing this strategy, some obstacles may appear. For example, excessive tax burden.
Tax burden: the meaning of the term
A tax burden should be understood as an indicator reflecting the combined effect of taxes on a particular payer and the economy of the country as a whole. It can be defined as the ratio of income that was received over a certain period of time, and taxes payable for the same period.
This process is an extremely important economic indicator, therefore, it is steadily under the attention of the state. Moreover, the level of tax burden depends on such factors as the rate and tax base. The experience of many countries has been proved by the fact that the higher this indicator, the lower the amount of funds coming into the budget. For this reason, most Western countries are moving towards a gradual reduction in tax rates.
The role of an indicator such as the tax burden
There are several reasons why this indicator is very important:
- It is necessary for the state in order to successfully develop tax policy. By introducing new taxes and abolishing the old ones, thereby changing the benefits and rates, the state accepts the obligation to apply and no longer overstep those levels of pressure on the economy, beyond which there is a risk of the formation of negative processes that could affect the whole country.
- Determining the tax burden is also important because with its help the government analyzes the tax burden in different countries and subsequently implements relevant reforms.
- Fixing the level of tax burden at the national level is important for the successful formation of social policy. Studying the severity of taxation for different groups of the population allows us to make the load distribution more even.
- The tax burden is an indicator that often serves as an indicator of the economic behavior of business entities. Since it is this indicator that determines the fact of what their decision will be regarding the placement of investments, production, etc.
The tax burden can never be determined solely by the amount of tax paid. There are always other costs related to the fulfillment of obligations by various business entities. We are talking about the following categories of expenses:
- costs associated with the payment of fines resulting from a violation of tax legislation:
- payments related to the maintenance of consultants and accountants;
- legal costs caused by violation of the rights of taxpayers (according to the Tax Code).
Real and nominal load format
The nominal tax burden is nothing more than the absolute amount of fees calculated at the established rates multiplied by the potential tax base. An example is the following scheme. If the income tax rate will be 13% and taxable population income reached the level of 4 trillion rubles, the tax burden will fluctuate at the level of 520 billion rubles.
Speaking about the real tax burden, it is worth noting that this indicator is determined as the sum of the actual mandatory payments and taxes that were paid.
In some cases, this indicator can be used to determine the degree of state participation in the country's economy. But it is worth considering that in this format the tax burden is a relevant indicator only when the budget is reduced with a surplus or balanced.
Impact on economic indicators
In the conditions of modern market relations, the role of investment is difficult to overestimate. But in order for potential investors to find attractive concrete projects within the country, a favorable environment is necessary, implying certain prospects. In this format, the tax burden of the economy plays a key role.
This indicator implies the ratio of all taxes that came from individuals and legal entities to gross domestic product. Thus, the share of GDP redistributed through taxes is estimated.
This type of tax burden can be calculated using the following formula: Br = Nuf: GDP. In this case, “Br” is the level of tax burden, “GDP” is the cost expression of the number of manufactured goods within the country, “Nuf” is the entire amount of taxes paid by legal entities and individuals.
But this indicator also has a drawback. Such a tax burden calculation implies a type in which the level of oppression of an ordinary payer is determined without taking into account the characteristics of a particular business entity.
Determining the burden for the population
In order to understand what the tax burden of a taxpayer is, it is necessary to take into account the amount of all payments received from the population in accordance with current rates. But to precisely determine this indicator is not so simple. This is due to the fact that the final consumer of almost all the goods that are produced in the economy is the country's population, which means that it is just ordinary people who transfer part of the tax burden. If these conditions are taken into account, then it will not be possible to determine the share of both direct and indirect taxes with mathematical precision. But the approximate level of the tax burden that is imposed on ordinary payers is calculated by the following formula: Br = H: Chn.
In this case, “Br” directly reflects the burden itself, “N” - the entire amount of taxes paid by the population, “Chn” is an indicator of the population of the country.
It will be fair to say that the level of tax oppression of ordinary citizens depends not only on the amount of payments, but also on the welfare of the population, in particular on wages.
Excess tax rate
In the case when the state initiates an excess tax burden, a distortion of the planned effect often occurs. First of all, business entities begin to focus on minimizing their obligations by changing the intensity and structure of production, purchases and sales. In addition, payers take certain measures in order to shift the tax burden on the counterparty. As a result, the ultimate goal for which the state increased the tax burden is not achieved.
It is worth noting the fact that the transfer of the degree of load towards counterparties is possible only with a concomitant rejection of the form of structure, consumption and production, the use of which would be optimal.
Since the excess tax burden is the reason for the loss of efficiency (welfare of the subject), it can be defined as a measure that distorts the effect of the tax. This idea is confirmed by the following fact: the lower the degree of decrease in the level of purchases (decrease elasticity of demand) due to indirect tax, the more funds the state collects.
Thus, the level of consumption in the country can be affected not only by price changes, but also by distortion of taxes, which significantly affect the incomes of ordinary people, which, in turn, leads to a decrease in the actual level of available cash.
How is tax burden shifted?
It is worth repeating the idea that, in most cases, business entities, not wanting to make significant deductions, switch to such a scheme of work, which implies a shift in tax burden on counterparties. This means that the state budget often receives funds not from those sources that were originally determined for this.
Thus, the analysis of the tax burden allows us to come to the obvious conclusion: it can shift from some subjects subject to taxation to others.
The process of transposition itself can occur as follows:
- Corporate income tax. One way to shift the load is to increase prices, which places a portion of the burden on consumers. But certain limitations exist: if monopolistic enterprises start to get involved in radical pricing policy then the state can respond accordingly - through sanctions by the antitrust committees.
- Property tax. This form of taxation is aimed at those who are subject to a formal burden (taxes on an apartment, private house, inheritance or land). Therefore, shifting the load in this case is extremely problematic. But part of the tax burden can still be removed through the leasing of property.
- Quality taxes on excise and sales. In fact, the bulk of the tax burden in this area is shifted to the consumer through price increases. In this case, we can say that the tax burden is an indicator equivalent to income tax, which covers a fairly wide range of product groups. Such a scheme is possible for the reason that the end consumer is not able to reorient to more affordable prices. The same thing happens with excise groups such as alcohol, gasoline and tobacco products, since it is difficult to find analogues that would be much cheaper.
- Personal income tax. In most cases, this type of tax is paid as it should under the law, but there are still some loopholes. As an actual example, we can cite doctors, private teachers, lawyers and other specialists who have the ability to raise prices for their services. This scheme allows you to shift the burden of taxes on customers.
This information once again confirms the fact that the incorrect distribution of the tax burden leads to a change in incentives and principles for carrying out activities.
Principle of equality
One of the foundations of harmonious interaction between the state and society is the principle of social justice. It is worth noting that this position of the government inevitably implies competently implemented equal tax burden, in which there will be no excessive pressure on specific social groups.
The essence of the principle of equality boils down to the fact that the circumstances of taxpayers are taken into account without formal equality and, moreover, to the maximum extent. The result will be observance and equality of the informal.
At the same time, the idea of social justice will be realized through the application of various types of tax incentives, for example, benefits. In today's society, the scheme leading to equality should look like this: under the same conditions for obtaining the same income, taxes are equal in magnitude, but under different conditions of profit generation, taxation should also be different.
Based on this understanding, socially limited groups (students, unemployed, disabled people, pensioners) should be provided with benefits, certain types of benefits and various forms of competent support, compensating for the inability to have a stable full income.
Effective methods to reduce the tax burden
There are several views on the solution of such a problem as excessive tax oppression.
Some politicians suggest lowering rates on VAT and profits, while maintaining benefits. But this technique has not received the utmost recognition, because, according to experts, it can lead to undermining the revenue base of the state budget. The opposite side argues that in this case it will be necessary to expand the tax base, find additional sources of financing and reduce budget expenditures.
It should be noted that an alternative scheme has been developed that allows for the reduction of the tax burden. We are talking about the phased abolition of certain benefits and taxes (over several years). Due to the influence of various factors, this strategy has not been properly implemented.
Liberal economic experts insist that it is necessary to reduce tax oppression primarily by reducing the deductions based on wages rather than sales profits. Moreover, in parallel with these actions, it was proposed to increase income tax rates.
The Federal Commission for the Securities Market, for its part, made a proposal on the invariance of VAT and the complete abolition of income tax, as well as fees in road funds. At the same time, the idea was voiced that income tax should have a low fixed rate (up to 20%). And to compensate for lost profits - introduce a tax on imputed income and a progressive tax rate on vehicles and private property.
There is also a position according to which it is worth maintaining the following types of taxes:
- import duties;
- patent fee for service and trade enterprises;
- VAT;
- state duties and fees;
- tax on certain types of property - securities, housing of a high level of comfort, property of organizations, vehicles, etc .;
- excise taxes, including taxes on fuel and energy resources.
Along with this, the relevance of joining the group of federal taxes, excises, import duties, etc. was presented.
Summary
As the experience of many countries shows, an effective reduction in the tax burden is possible by reducing rates for companies with low turnover and implementing a system to cover losses from profits both earlier and future. And of course, competently designed and implemented benefits will significantly change the situation.
