Optimization of the structure of taxation in the state
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3.Book of Proceedings esdBaku2020 Vol3 Online
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- 4. CONCLUSION
- LITERATURE
55 th International Scientific Conference on Economic and Social Development – Baku, 18-19 June, 2020
401 income tax for 7 years. Incentives for micro-entrepreneurs include tax and profit tax exemptions for 75 per cent of income and profit from business activities. In addition, legal persons and private entrepreneurs who are micro-entrepreneurs are exempt from property tax. The amendments to the Tax Code also provide for the exemption of income and profits from the innovative activities of startups engaged in micro and small business activities from the payment of income and income tax for a period of 3 years from the moment they receive a certificate for startup activities. Thus, the state seeks to give an impetus to the development of startups in Azerbaijan. Amendments to the Tax Code also affected the simplified tax, which provides for both tax benefits and restrictions. So from 2019 the single simplified tax rate will be set at 2%. Earlier, the simplified tax rate was 4% in Baku and 2% in other cities and regions, as well as in the Nakhchivan Autonomous Republic [7]. The exemption of subsidies and taxes from agriculture, the provision of machinery and fertilizers on favorable terms, the promotion of investment and exports, and other state support mechanisms play an important role in accelerating regional development. Another indicator of this development is the increase in tax revenues by region. As a result of systematic measures taken in 2019 on revenue transparency and clarity of accounting, funds in the state budget in the amount of 817 million manat or more than the forecast of 163 million manat were secured. This is 25 percent more than the forecast [6]. It should also be noted that tax incentives for agricultural producers have been applied in Azerbaijan since 2001. Along with reducing the tax burden of entrepreneurs in order to save their working capital, as well as stimulate export, the period for returning the already paid VAT from operations carried out by persons involved in export has been reduced. These and other changes will create conditions for reducing the tax burden of taxpayers, efficient use of working capital, support the development of entrepreneurship in the agricultural sector. In the Doing Business report, Azerbaijan was included in the list of twenty most reforming countries in 2019 [6]. In the market economy, the basic rules for taxation of income of individuals should not practically differ from the rules for taxation of income of legal entities. To tax the income of individuals and individuals in many countries, a single system model of income tax is used, for which there is a simple theoretical justification. Legal entities are organizational forms of doing business, allowing to distinguish between property liability of participants and the right to income of individuals. In this case, the tax system should not determine the choice of the form of activity, establishing similar taxation regimes for all forms permitted by law. Azerbaijan’s tax legislation prohibits the establishment of differentiated tax rates depending on the form of ownership, or citizenship of individuals or the place of origin of capital. In this regard, from January 1, 2010, the corporate income tax rate was reduced from 22% to 20%. An addition to Article 101.3 of the Tax Code was also adopted: taxable income is levied on taxable income of individuals engaged in entrepreneurial activities without creating a legal entity at a rate of 20% [1]. From the standpoint of the efficiency of social reproduction and economic growth, the interests of the state, it is fundamentally important not only to optimize the amount of taxes collected at the state level, but also to optimize the structure of tax payments in the following areas:
• distribution of the total amount of taxes levied on a state scale between taxpayers - organizations and the public; • distribution of the total mass of taxes by their specific types.
Optimization of the distribution of the total mass of taxes between taxpayers is carried out by optimizing the distribution of the total mass of taxes between legal entities and individuals. It is known that in the theory and practice of taxation there are two diametrically opposite approaches to the taxation of legal entities and individuals. According to one approach, the center of gravity of taxation should fall on individuals, and in accordance with another, on legal entities.
55 th International Scientific Conference on Economic and Social Development – Baku, 18-19 June, 2020
402 It is obvious that the centre of gravity of taxes can be placed on individuals only in countries with a sufficiently rich population. In poor countries, it is not possible to place the tax burden on individuals. In principle, taxation of natural persons, not by income but by property, has two very important advantages: • taxes are almost impossible to evade; • property tax administration is easier than income tax administration.
It is noteworthy that in countries with poor or underprivileged populations, there are social strata with extraordinary wealth. These sectors can be fully taxed at a level that is by an order of magnitude higher than that of the vast majority of the population. However, excessive taxation of the very rich may encourage them to leave the country, buy real estate in other countries. In our view, in determining the optimal balance in the taxation of natural and legal persons, it is first necessary to determine the taxability of natural persons and, consequently, the amount of possible fiscal revenues of the budget. Then transfer the remaining tax amount to legal entities. However, in the current context of low real wages for workers, it is advisable to maintain the current procedure for taxing the income of natural persons. In principle, having determined the total amount of the supposed optimal taxation of legal entities, we are faced with the problem of its distribution. Here again, there is a fundamental contradiction in the taxation of legal persons. This contradiction should be clearly defined, first, and second, the most rational ways and means of counteracting its negative effects on the national economy should be found [4].
One of the most important elements of the tax system in Azerbaijan is the creation of a favorable business environment, the focus of business on the development of the economy, and compliance with the economic interests of not only the state, but also entrepreneurs and citizens. The mechanism of tax regulation in Azerbaijan is characterized by the application of reduced tax rates. In our country, the state through the reduction of tax rates supports entrepreneurs who have switched to a simplified taxation system. An increase in the incentive investment effect of lowering tax rates, in this situation, in our opinion, is possible only by reducing the corporate income tax and personal income tax rates, or by providing large investment deductions. Strengthening the investment orientation of taxes in the mechanism of economic incentives also involves the adoption of decisions on reforming the tax system for certain types of activities that are an integral part of the investment process, contribute to the development of a favorable investment climate or participate in the formation of investment resources in the economy, which requires a separate study. Such types of investment activities include operations in the financial market, leasing activities, etc. In the process of transforming taxation in Azerbaijan, it is imperative to take into account the development trends of tax systems in developed countries. In the context of a globalized economy, the tax systems of these countries are unified on the principle of neutrality with respect to business, which creates the conditions for free flow of capital between states and its integration. To optimize the distribution of the total amount of state tax revenues by type of tax, it is advisable to carry out such optimization on the basis of an analysis of tax revenues in state revenue over the course of several years by type of tax, respectively reducing the rates for one tax and leaving the rates unchanged for the other, thereby achieving optimization in relation to the current period of socio-economic development of the state. Objective requirements to the tax system, expressed in the principles of its construction, should be the basis for determining the strategy of tax reforms, as well as their most important tasks. At the same time, the following areas should be highlighted as priority: • establishment of the most vital tax system; • creation of an effective tax administration system;
55 th International Scientific Conference on Economic and Social Development – Baku, 18-19 June, 2020
403 • systematization and unification of tax legislation with the definition of common basic concepts and categories.
In line with these fundamental directions, the most important tasks of the stage of development of the tax system can be distinguished: • further reduction in the number of taxes and their unification; • equalization, whenever possible, of taxation conditions for all taxpayers, first of all, due to the abolition of unreasonable benefits; • improving tax administration and increasing the level of tax collection through the use of additional mechanisms and tools in tax legislation, especially in connection with the improvement of tax control; • correction of inconsistencies, inaccuracies, etc. in the rules for determining the tax base of existing taxes; • acceleration and simplification of procedures for appealing decisions and actions of tax authorities; • reducing the tax burden of taxpayers; • legally guaranteed permission to take into account when determining the base of income tax all necessary and documented expenses associated with its extraction. • simplification of the tax system by unifying tax bases and rules for calculating individual taxes, as well as methods for calculating them and the procedure for their payment. • optimization of the procedure for the distribution of tax revenues and tax powers between government and administrative bodies.
1. The Tax Code of the Azerbaijan Republic, Retrieved 01.01.2020 from http://old.taxes.gov.az/modul.php?name=qanun&cat=3&lang=_eng 2. Strategic Roadmap for the National Economy Perspective of the Azerbaijan Republic, 06.12.2016, Retrieved 01.11.2018 from https://static.president.az/pdf/38542.pdf 3. Tax Policy Handbook / edited by Parthasarathi Shome. — Washington, D.C: Tax Policy Division, Fiscal Affairs Department, International Monetary Fund, 1995, 318 p. 4. Maharramov R.B. (2011) Problems of formation and development of the tax system of the Azerbaijan Republic. Monograph. Baku, p.307-309 5. The State Statistical Committee of the Azerbaijan Republic, statistical data 2008-2019, Retrieved 01.01.2020 from https://www.stat.gov.az/source/finance/?lang=en 6. Official web-site of the President of the Republic of Azerbaijan, Retrieved 05.02.2020 from https://en.president.az/articles/35705 7. http://interfax.az/view/753122
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