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Basic principles of taxation of small-scale enterprises in the Russian Federation
Khodyreva Viktoriia Andreevna, A student of a faculty of law, National Research University of Russian Federation «Higher School of Economics»
E-mail: vikuzka@inbox.ru
Basic principles of taxation of small-scale enterprises in the Russian Federation
Abstract: this research is devoted to general principles of taxation of small-scale enterprises. Development of small-scale enterprises is one of the most important lines of tax policy in Russian Federation. The development of principles of taxation is important while forming a strong state system of taxation. In this work basic principles and some specific are provided. This work is of great scientific interest to law students, graduates, teachers and other persons interested in law and particularly in tax law.
Keywords: general principles, specific principles, small-scale enterprises, small business.
Basic principles of taxation of small-scale enterprises
Small business can provide for economic modernization, it adapts to dynamic conditions quickly because of its flexibility, lower capital intensity and mobility. A well-developed system of taxation is called on to stimulate small-scale businesses’ strengthening. There are a lot of privileges and benefits guaranteed to this type of entities by government.
It means that only specially determined groups of subjects are under the regulation of tax legislation concerning small-scale enterprises. It is very important to define which of business organizations may be referred to small entrepreneurship. There are three criteria — the one of status and two of quantitative nature (regarding: the staff numbers and scale of operations). It is generally accepted in the Russian law system that a small-scale entity is an organization where the share of external participants may account no more than 25 % of its charter capital. There also should be from 16 to 100 employees. And the last feature typical of such small-scale entity is that its earnings range between 6 and 400 million rubles to be considered a small-scale entity. These conditions are stated by Federal Law “On the development of small and medium entrepreneurship in the Russian Federation”.
However, there is no clear-cut definition of small business, as it changes depending on the sphere of usage. For example, the Tax Code of the Russian Federation does not contain well-defined term “small-scale enterprise”, but at the same time some benefits for obviously small entities do exist. If there were a unified definition of this type of entrepreneurs they could get appropriate status hard and fast. Due to this tax authorities and tax payers would not be obliged to examine all criteria for every benefit or special rule. And, until our legislation has developed special unified status for small enterprises there will be used different legal regulations for any benefit or special tax regime in order to determine the criteria like turnover, profit, quantity of employees and fixed assets’ cost. That is why it is necessary for everyone has to use the basic principles of small business’ taxation to realize the nature of this type of organizations.
The main principles of taxation which were provided in the monograph “An Inquiry into the Nature and Causes of the Wealth of Nations” by A. Smith [3.] should be used as a
ground for researching taxation rules for small-scale enterprises. But it is necessary to take into consideration features of this special group of entities while making a list of rules.
Adam Smith determined 4 rules that are known as classical principles of taxation.
Firstly, the principle of equity must be mentioned. It appears in a necessity to distribute money among citizens, an adequacy of taxes on property or income. So, the equity means universality and proportionality in taxation.
A concept of equity is the main indicator of the rationality of the state taxation system. Moreover, it is universally recognized. It can be illustrated through the example of a system of taxation of imputed earnings. A lot of disputes are revolving around indirect methods of determination of tax payer’s income. Ifwe consider the analysis of application practice of such type of tax, we shall see that a firmly established by law sum of income for every business is quite high. A difference influences essentially small regions where profitability of people is low in comparison with regional centers or large cities [1, 19].
Secondly, Adam Smith picked out a stringency of determination as a next principle. All of the elements of a payment to a state must be defined, it cannot be random. It is worthy to note, that small businesses taxation is determined but as it changes often, the positive effect of application of the principle of certainty can’t be observed, as it doesn’t work. In other words this principle operates only for a short period.
Thirdly, one of the classical rules is to make taxation convenient for tax payers. The state should apply time limits and way of making payments that are more opportune for people. But surely, principles of certainty and convenience just soften discontent of tax payers but do not argue against the priority of state interests before individuals.
And the last principle concerns the aim to reduce expenses on levying of taxes. Costs on collecting taxes must be by a factor of several times less than the total sum of payments. When it comes to small business, such costs appear great. Small-scale enterprises belong to that type of tax payers who are difficult to control. So, government has to spend more resources to check them. Different systems of taxation are aimed at minimizing costs on it.
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Section 13. Science of law
Special principles of taxation of small businesses can be divided into two groups depending on functions fulfilled by those principles, they are as follows [2].
Principles that promote rights and interests of small-scale enterprises.
Principles that promote interests of public authorities in the Russian Federation.
The first group of principles as a ground for creation of adequate tax system includes principles of publicity, legality, neutrality, security of tax payers, proportionality of tax burden. Let’s consider all of them in succession.
The principle of publicity. According to it taxes must be levied openly and publicly. People and especially subjects of small business should understand tax policy, and at best approve of it. State and representatives of small business should cooperate to work out mutually convenient conditions.
If a real cooperation between government and entrepreneurs was provided, shadow turnover could be stopped. Tax payers would be involved into legislative process. This would be a reason for reducing influence of disapproval on existence of shadow turnover.
The principle of legality. It is a general rule of operating the whole legal system. It is fixed in article 57 of the Constitution of the Russian Federation and in the first part of article 3 of Tax Code of the Russian Federation. Legislative process relating to small businesses should be under strict legal procedure.
The principle of neutrality. Generally this rule is directed to reduce an influence of tax factors on the process of decisionmaking by subjects of small-scale business. In other words, while carrying on business entrepreneurs should act basing not only on impact of taxation but on other factors equally.
The principle of security of a tax payer. This rule supposes existence of protective system of tax payers’ interests. For example, articles 3 and 108 of the Tax Code of the Russian Federation provide for presumption of innocence.
Furthermore, tax payers are entitled to have legal remedy including claim for compensation of damages caused by improper actions of tax authorities.
However, as applied to representatives of small business, the principle of protection does not work in full. They have less protective methods, finance opportunities and sometimes insufficient juridical knowledge. But this principle can be realized by implementing an institution of representatives in a court.
The principle of proportionality. Taxation cannot impede exercise of rights. But if we turn to chapter 26.2 “Simplified tax system" of the Tax Code some doubts about realization of this rule can arise because minimum level of a tax is already fixed.
The second group of special rules of taxation includes principle of priority of state interests, unity of taxation, tax federalism and distribution of income among budgets [2].
The principle of priority of state interests. It is stated in the Constitution that everyone must pay taxes and dues. Government gets resources from taxes and directs it to financing of social and the most urgent expenses. The financing of some spheres is more effective by collective rather than individual investments in conditions of market failures. In addition to that, small businesses are interested in additional financing by the state.
The principle of unity of taxation. In part 4 of article 3 of Tax Code of the Russian Federation there is a rule according to which no tax can be imposed out of Russian economic zone unity, because that can either break or limit free transference of goods, or prevents any economic activity. Unified tax policy, system of tax authorities and legislation are the ground for successful operation of economic activity. Also a necessity of unified taxation is dictated by a possibility of some conflicts among entities and between them and state authorities if the size of taxes varies from one region from another.
The principle of federalism. This rule is connected with a concept of unity of taxation. Real independence of the subjects of the Federation should be based on their own finances. But in Russia there is a need to redistribute resources among budgets for the reason of inequality of economic development. These circumstances make it possible to satisfy minimum demands of regions. So, the concept of federalism helps to defuse financial conflicts and defines the powers of authorities according to their levels.
In addition, it is necessary to mention that all of these concepts are fundamental from the viewpoint of formation of small business’ taxation system. It does not mean that the list of principles is complete but other rules are used only to develop and supplement fundamental ones.
To sum it all up, a few words should be said about importance of taxation system development. It is a prominent aspect of forming an entrepreneurship in the Russian Federation. It is important to understand general rules of taxation, not only legislation made by government. That is the reason why every research should start from defining main principles.
References:
1. Blinov A. The problems of stagnation and development of small-scale enterprises.//“Investments in the Russian Federation" - 2003. - No. 1.
2. Parygina V A. The principles of taxation in the Russian Federation: the system of tax coordinates.//Electronic service: “ConsultantPlus"
3. Smith A. An Inquiry into the Nature and Causes of the Wealth ofNations./A. Smith. - Oxford: Clarendon Press, 1976. - 570 p.
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