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УДК 336.2
Practical approaches of tax burden evaluation of customs union countries' economies
O.I.Lygina
Aktobe University named after S.Baishev, Aktobe, Kazakhstan
L.N.Kim
Miras University, Shymkent, Kazakhstan
Summary. Practical approaches of tax burden evaluation of Kazakhstan, Russian and Byelorussian economies are described in the article. The system of analytical evaluation of CU countries' economies tax burden is offered for further research and practice investigation of tax burden.
Key words: corporate income tax, gross domestic product, tax burden, fiscal mechanism.
Tax reforms in some countries pursued the aim to counterbalance the general corporate and individual rates. In the past Australia, Denmark and other countries «reformed» the tax systems by means of increasing corporate rate to equalize it with individual rate. However, tax competition has changed the course of tax policy of these countries and they have lowered corporate rates.
Decreasing of corporate taxes rates in countries have formed some pressure upon other countries where on - former the taxation of corporations is burdened by heavy taxes.
USA is one of the countries which have the highest effective corporate tax rate. In 2007 in research of the scientist under taxes of Jack Mintts is compared marginal(limiting) effective tax rate of 80 countries. At 38 % of the rate of the USA has 4th highest rate among the countries of the world and the highest among 30 OECD countries.
For a tax competition of the countries both standard and effective tax rates are very important, because both of them reflect corporate decision-making. Basically effective rates influence decisions in the field of business management.
Corporate tax rates corresponding to the act influence investment decisions. Legislative rates are important, because they are significant sizes - basis tax climate of the state when the country reduces the legislative rate; it sends the strong impulse opened for business to world investors.
Similarly, in Kazakhstan taxes rates are reduced to admissible minimum, increasing appeal of our country to business and investments and reducing, thus, evasion from taxes. Since January, 1st, 2009 there is entered the rate of corporate income tax of 20 %, earlier rate CIT was 30% [1, 2].
The most important and conceptual moment in Kazakhstan is stage-by-stage decreasing of rate of corporate income tax (CIT). Decreasing of tax burden is predicted on the given type of tax stage by stage to 15 % of the rate. However it is courageous step in the field of reforming corporate taxation.
Analysis of system of profit taxation of corporations consists in revealing of practical realization tendencies of an order of the taxation at microlevel and macrolevel. Proceeding from the aforesaid, it is possible to allocate some basic components of carrying out analytical work:
1. Macroeconomic analysis is the definition of tax revenues dependence from macroeconomic indicators of countries development.
2. Microeconomic analysis is the analysis of tax revenues in comparison to indicators of economic activities of organization.
Use of the given directions will allow to estimate a situation with tax revenues in a complex and to make correct system decisions on improvement of taxation efficiency.
For the situation analysis at macroeconomic level we will consider tax revenues in 2005 - 2010 in Kazakhstan. During the considered period there is growth of tax revenues, except of 2009 because of decreasing CIT rate. Dynamics of decreasing of CIT receipts sums in absolute value since 2005 till 2007 proves to be true proportional decrease in a relative indicator - relative CIT density in tax incomes of the budget up to 2010. Analyzing the sums of CIT receipts after rate decreasing in 2009 it is traced the reduction of CIT gathering in budget; however in 2010 the situation is leveled.
The analysis of CIT dynamics isn't possible without disclosing of major factors influencing its relative and absolute value. Revolutionary aspect in CIT development is decreasing of CIT rate since 2009 till 20 %. The data of table № 1 show ambiguous dependence of rate size and tax receipts in the budget. Rate decreasing on 10 percentage points has led to essential decrease in receipts in the budget. In 2009 CIT gathering were reduced to 30,07 % at the general reduction of tax revenues by 20,95 % to previous year. And in 2010 the gain of CIT and tax revenues in the budget has exceeded 30 %.
Table 1. The Analysis of tax revenues and CIT dynamics from 2005 up to 2010
Indicators for 2005 for 2006 for 2007 for 2008 for 2009 for 2010
Tax revenues, million KZT 1 998 314 2 209 102 2 356 040 2 819509 2 228 700 2 934 081
Growth rate of
budget tax incomes - 110,55 106,65 119,67 79,05 131,65
to previous year,%
Corporate income tax, million KZT 834 332 776 609 758 301 920 912 643 700 837 233
CIT growth rate to - 93,08 97,64 121,44 69,90 130,07
previous year,%
CIT ratio in tax 41,8 35,2 32,2 32,7 28,9 28,5
incomes, %
CIT Rate,% 30 30 30 30 20 20
CIT sum on 1% rates, million KZT. 27811 25887 25277 30697 32185 41862
Note - a source is calculated by the author according to magazine «Statistical bulletin of Ministry of Finance of the RK» 2005-2010 [11, 12, 13, 14, 15, 16].
Table 1 confirms action of Laffer's theory in economy of Kazakhstan. Decreasing of CIT rate has led to disproportionate receipt of CIT sums in the budget. If in 2008 on 1 percentage point of CIT rate it is necessary 30697,0 million KZT receipts in the budget (920 912,0 \30) at rate decrease on 10 % CIT shortfalls sums of the budget should be 306970,0 million KZT., however in the budget has arrived 643 700,0 million KZT (forecast - 613 942,0 million KZT). Accordingly, in 2009 on 1 percentage point of CIT rate it is necessary 32185,0 million KZT. If we compare 2008 and 2010 in 2010 on 1 percentage point of CIT rate it is necessary 41862,0 million KZT receipts in the budget (837233,0 \20).
Figure 1 - Dynamics of CIT sums on 1 % of the rate, million KZT from 2005 till 2010
Note - source is created by the author on the basis of own calculations.
Decreasing of CIT rate has rendered a positive effect on dynamics of gross national product, exactly the gain of gross national product in real expression in 2009 has made 1,2 %, in 2010 - 7%.
Application of united methodology of calculation factor of tax burden which is not dependent on a branch accessory of managing subjects and features of their taxation, promotes fair carrying out of a tax policy. The methodology calculation of tax burden as shares of tax revenues in gross domestic product is widely applied by foreign countries. For an objective estimation of tax revenues it is necessary to consider the basic mac-roeconomic indicator of the country - GDP. The profit is one of making GDP along with indirect taxes and incomes the form of a salary.
Calculations of tax loading and share of CIT (profit tax) total sum of GDP on the countries of the Customs union are shown in tables below.
Table 2. Dynamics of tax burden in Kazakhstan since 2006 till 2010
№ пп Name of indicator Unit of measure 2006 2007 2008 2009 2010
1. Gross domestic product Billion KZT. 10213,7 12849,8 16052,9 17 007,6 21815,5
2. Tax revenues Billion KZT. 2209,1 2356,0 2819,5 2228,7 2 934,1
3. Tax burden % 21,6 18,3 17,6 13,1 13,4
4. Share of CIT in GDP % 7,6 5,9 5,7 3,78 3,84
Note - source is calculated by the author according to magazine «Statistical bulletin of Ministry of Finance of the RK» for 2010.
Performed settlements on Kazakhstan during the period since 2005 till 2009 show that level of tax burden tends to decrease. Abundantly clear that about introduction of New tax code in 2009 which has been directed on decrease in tax burden on business - structures, has justified expectations of businessmen. Since 2005 till 2009 burden on enterprises profit has decreased on 7,2%.
Considering the taxation of profit in Byelorussia it is necessary to consider that since January, 1st, 2010 has come into force special part of the Tax code which has defined an order of calculation and payment of all taxes, gathering (duties) and special modes of the taxation. The given document has defined the basic directions of reforming tax laws, as regards existing level and system of payment of deductions into the fund of social defense of population, and also complexities in administration of separate taxes.
Performed settlements on Byelorussia during the period since 2005 till 2009 show that level of tax burden since 2005 till 2008 tends to increase [3, 4, 5]. Our calculations confirm analytical reports on business dealing of the international financial organization of the World bank of IMF in which specify that a country rating on indicator «Taxation» 183 place has Byelorussia from 183 investigated countries of the world, i.e. developed situations is burdensome for businessmen.
It is necessary to notice that high enough tax burden leads to outflow of the capital from the country, business leaving in «shade» and impossibility of attraction of direct foreign investments. However in 2009 the management of Byelorussia has accepted a number of effective measures on improvement and simplification of the taxation of business that was reflected in updating of tax burden towards fall. Since 2008 till 2009 burden on enterprises profit has decreased on 1,2 %.
Considering world financial shocks, Russia similarly to Kazakhstan has brought a number of changes in the Tax Code which have come into force since January, 1st, 2009. Their big part goes to chapter 25 «organizations tax profit». Among innovations there are very essential changes particular it concerns amortization of property, deductions from taxable profit of the raised limits on voluntary medical insurance, traveling and living expenses, expenses on personnel training.
Table 3. Dynamics of tax burden in Byelorussia since 2006 till 2010
№ пп Name of indicator Unit of measure 2006 2007 2008 2009 2010
1. Gross domestic product Bln. RUB. 79,3 97,2 129,8 136,8 162,96
2. Tax revenues Bln. RUB. 26,9 34,2 46,8 41,3 44,9
3. Tax burden % 34,3 33,9 35,2 30,2 27,6
4. Share of profit tax in GDP % 2,4 4,0 3,9 3,36 3,44
Note - a source is calculated by the author according to the Statistical collection of National statistical committee of RB «Finance of the republic of Belarus» 2010
Performed settlements on Russia during the period 2006- 2010 show that level of tax burden tends to decrease especially tax burden for these years has decreased for 4 %. (See table 4) [6, 7, 8, 9].
Table 4. Dynamics of tax burden in Russia since 2006 till 2010
№ пп Name of indicator Unit of measure 2006 2007 2008 2009 2010
1. Gross domestic product Bln. RUB. 26917 33248 41277 38786 44939
2. Tax revenues Bln. RUB. 8075,2 10589,1 12014,4 10435,7 11289,0
3. Tax burden % 30,0 31,8 29,1 26,9 25,1
4. Share of profit tax in GDP % 6,2 6,5 6,1 3,2 3,9
Note - a source is calculated by the author according to Federal Agency of the state statistics «Russian statistical year-book» 2010.
Abundantly clear that with introduction of changes in the tax code in 2009 is observed the positive dynamics in decreasing of tax burden on enterprise sector. For 2009 burden on profit of the enterprises has worked out 3,2 % that in relation to 2005 has decreased on 3%.
The leading positions among the countries of Customs union on the general tax burden are maintained by Kazakhstan, having consecutive dynamics of decrease in tax burden though it is necessary to notice that in 2005 Russia's ITB was lower on 1,3 % in comparison with ITB of Kazakhstan. Byelorussia has high factor of tax burden in comparison with Kazakhstan and Russia, because of a high share of indirect taxes (the VAT, excises) in tax incomes of the budget of the country (Figure 2)
2006 2007 2008 2009 2010
Figure 2 - Comparative estimation of the general tax burden (ITB), % on the countries of Customs
union
Note - source: it is created by the author on the basis of own calculations.
Tax burden for Kazakhstan economy by our estimations doesn't exceed 14 % of GDP, in Belarus - 30,2 %, Russia - 21 %, whereas in the countries of OESR - 36 %, and in EU - 38 %. Therefore financial crisis in the countries OES and EU is especially sharply felt.
Changing of alignment of forces in world economy were consequences of the past world financial crisis, especially:
1. The crisis which has burst in the USA of crediting gradually has captured all financial markets of a planet, having caused falling of rates of increasing the world economy.
2. According to OES, it is the deepest «synchronous» recession since the Second World War.
3. Any industry, any geographical region couldn't avoid influence of the crisis phenomena in world economy.
4. Mass worldwide collapse in stock markets:
1) Dow-Johns' index has fallen to a record minimum for the last 10 years;
2) Nikkei's index has fallen to record-breaking low mark for the last 25 years;
3) The British index FTSE-100 has fallen to 40 % for 6 months, having shown the worst dynamics for the last 15 years.
5. Steep falling of prices for real estate.
6. Sharp growth of unemployment.
7. Considerable decrease (of index) of consumers' confidence.
8. Essential delay of rates increasing of demand, delay of payments and liquidity deterioration.
9. Appreciable reduction of companies' profit.
The analysis of studying CIT share (profit tax) in GDP of the countries of integration union shows that in the Republic of Kazakhstan the share of enterprises profit taxation in comparison with Russia and Byelorussia is high in 2006 and 2009. Corporate tax burden in 2007, 2008 and 2010 is rather more in Russia. Tax burden on enterprises profit in Belarus is low 3,44 % in comparison with the RK (3,84 %) and the Russian Federation (3,9). Thus, despite of dynamical change of ITB since 2006, we observe in 2010 in the countries of Customs union equivalence of the given indicator with some error (±0,5%).
Country prepares for accession into WTO. We will meet a rigid competition from foreign suppliers of goods and services. And to stand this competitive struggle we should lower tax burden. It will give the chance for enterprises of processing sector to accumulate own means for modernization of manufacture, the decision of problems of own production competitiveness [10].
Corporate income tax should be considered as means of increasing or decreasing of social intensity in a society. Because reducing, on the one hand, a real standard of well-being of the person and, thus, preventing to reach a desirable standard of living, at the same time on the other hand, it raises, therefore as comes back in the form of grants, pensions, free treatment and education, guaranteed by the state of maintenance of legality and confidence in future. Hence, it can be estimated both as positive and negative - depending on personal and economic installations, economic policy of the state and condition of national economy.
S т—ЦЬ
2006 2007 2008 2009 2010
Figure 3 - Comparative estimation of CIT share (profit tax) in Gross Domestic Product, % on countries
of Customs union
Note - source: it is created by the author on the basis of own calculations.
Therefore, summing up the results of studies to assess the role of the corporate income tax in the budgets formation as well as the tax burden on business of the Customs Union, we can draw the following conclusions:
1. Share of the tax component in supporting revenue budgets of the CU is high enough. Generally tax revenues determine the degree of fiscal stability. Corporate income tax is one of the main sources of budget revenues, regulator of its financial ratios and process savings, economic growth; it is also an economic lever to encourage entrepreneurship, management tool, a particular form of equalization of economic conditions and the driving force of economic competition. In the present economic situation stands the problem of increasing the numbers of taxes.
2. Direct relationship to the CIT and its share in total tax revenues decreasing had a decline in CIT rates and decreasing of profitable enterprises since 2007.
3.Indicator neutrality reflecting the share of taxes in GDP ( including the share of the CIT (income tax) in the GDP of CU), accumulated in the budgetary funds as an level indicator of the tax burden in market conditions a number of factors are questioned, such as preferential tax regimes availability which reduces the tax burden for individual taxpayers and increases its value for a particular taxpayer who performs tax liabilities in accordance with generally established tax regime; low execution fiscal discipline confirmed by the number of actual taxpayers, size and dynamics of the tax debt; GDP produced in the shadow economy does not provide real tax revenues to the state treasury; socioeconomic conditions for business development and expansion, including individual industries and regions of the CU .
According to experts estimation, at an acceptable value of the average tax burden as a proportion of GDP it is a real value for the particular taxpayers may vary between 10% that suggests the problem of reducing the tax burden on business remains relevant and for providing an objective assessment of the tax burden it is necessary to correct an indicator of the share of taxes in GDP (including the share of the CIT (income tax) in GDP), taking into account above factors.
Obviously, we need more effective financial regulation, establishing more stringent regulatory requirements for capital adequacy, liquidity and supervisory functions.
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Лыгина Ольга Ивановна, доктор PhD в области Финансов, Актюбинский университет им. С.Баишева, г. Актобе, Казахстан
Ким Людмила Николаевна, доктор PhD в области Экономики, Университет Мирас, г.Шымкент, Казахстан
