Taxation - what is it? Objects of taxation

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Each business entity in the course of operating activities is faced with the practice of taxation. Therefore, in order to successfully conduct business that does not contradict the current legislation, it is necessary to clearly understand not only the essence of this concept, but also to conduct a competent fiscal planning policy. In the article below, we will talk about the basics of this system and some of the rules that competent entrepreneurs need to follow.

The essence of taxation

Few people know that taxation is an ancient word that used to literally mean sacrifice, slave labor and even spoils of war. From time immemorial, the state treasury has been replenished in all sorts of ways, by the way, not always humane. Every capable citizen was simply obliged to pay tribute to the government for the fact that he can earn a living for himself and his family in this territory.

But over time, legal awareness in society grew, and the state came to understand more humane and regulatedways to replenish their own treasury. Therefore, today taxes are not only a tribute and strengthening of the state budget, it is a conscious obligation of business entities. Therefore, almost every one of us understands why he pays money to the treasury.

Today, the object of taxation is any property, part of the value of which an entrepreneur or any person who makes a profit is obliged to pay to the state. Despite the obligatory execution of payment, in the vast majority of cases this procedure is voluntary, which indicates a high level of legal awareness of modern citizens.

Principles of taxation

Taxation is a structured and state-regulated complex system that operates within the framework of the law.

Thus, in the Russian Federation there are a number of principles that this economic institution corresponds to:

1. Universality. This means that the treasury must be replenished by all, both individuals and legal entities, that meet the requirements of the Tax Code of the Russian Federation. By definition, taxation is not discriminatory.
2. Equality. The tax burden is distributed according to the capabilities of each subject and is regulated through incentives.
3. Clarity. The legislation is interpreted in a consistent way, so each payer can find the information they need in the Tax Code of the Russian Federation.
4. Legality. The state provides for a number of grounds on the basis of which a person is obliged to payshare of profits to the treasury.

Taxation methods

Taxation is a process that is regulated by state policy in several directions simultaneously. One of these is the method of calculating the tax burden on business entities. The latter represents the dynamics of changes in fiscal rates, which may fluctuate depending on changes in the size of the budget base.

In this aspect, taxes and taxation are a continuous process of regulating the volume of the treasury. So, the following can be attributed to fiscal methods:

• Equal. This means that an identical burden is imposed on each business entity relative to others. At the moment, it is practically not used, as it is obsolete.
• Regressive. It is characterized by a decrease in the tax rate in accordance with the growth of the treasury base. Often used when the level of the budget depends on a clearly defined amount, and not on the income level of the population.
• Progressive. Acts inversely from the regressive one, is actively used in the Russian Federation.
• Proportional. It is characterized by a fixed rate and does not fluctuate depending on the dynamics of the level of income of business entities.

Varieties of taxes

The purpose of taxation is the regulated replenishment of the state treasury, therefore, in order to organize this process with the development of legal consciousness, the society arose all new types of fiscal fees, which were further divided into subspecies.

Among these are the following:

1. By payment method: direct (proportionate to income level) and indirect (expressed as a surcharge on the cost of goods, which is covered by consumers). Also, in practice, a simplified taxation system is used (this is a special regime for small businesses).
2. According to the specifics of use: general (collected to finance national goals), special (have a narrow focus of coverage - for example, when paying a tax on fuel and lubricants, funds go to road funds).
3. According to the place of distribution: state (paid to the centralized body of the fiscal service) and local (intended to cover intracity expenses).

Taxation functions

Taxation is a continuously operating mechanism that performs a number of functions:

1. Fiscal activity. It is the main one and consists in the process of regulation and formation of state treasury funds for their further competent and even distribution in relation to local needs.
2. Distribution activity. It is also called social, since it performs a leveling function between different segments of the population. In other words, part of the contributions of business entities to the budget is allocated to cover the expenses of vulnerable categories of society.
3. Regulatory activity. It maintains a balance between economic processes within the state, and also accumulates funds forfilling financial gaps in a particular government industry.

The essence of the company's tax policy

For an entrepreneur, the object of taxation is his own earned profit, and therefore, as a rule, he does not particularly want to share it. In order to minimize costs and eliminate the risks of violation of the law, it is important for a business entity to choose a competent tax policy. This set of measures must be followed during the implementation of operational activities.

When forming the tax policy of an enterprise, it concerns the following areas of activity of a business entity:

• first you need to decide on the feasible burden of the fiscal burden, and then - with the type of activity;
• after you should decide on the schedule and deadline for paying obligations to the budget, which will become as comfortable as possible for timely execution under the current legislation;
• The last thing to think about is investment issues, as well as the method of distributing the net profit of the enterprise (not to be confused with such a term as profit before tax - this is a slightly different concept, but more on that below).

Enterprise tax burden

The tax burden, or the burden, as it is also commonly called, is the ratio of funds paid to the treasury of the enterprise by a business entity to the total mass of revenue received for the reporting period. This is probably the most sensitive questionamong entrepreneurs, since he does not care only for individual entrepreneurs who have received the right to a simplified (patent) system for paying fiscal obligations. Patent taxation is a special system that replaces a number of taxes (personal income tax, VAT, property liability) and greatly simplifies the business of an entrepreneur.

As for other business entities, they must constantly monitor the coefficient of the tax burden on revenue, cost of goods sold and the total value of assets involved in production. In the case of a significant share of the output, it is worth turning to the introduction of a more efficient tax policy at the enterprise.

How to create an effective tax strategy

Not every business needs measures to improve its tax strategy. Often, this procedure applies only to those business entities that pay to the state treasury more than a third of the amount of value added for manufactured products. Since in this case they not only lose a considerable share of net profit, but also spend the resources of obsolete funds every month. After all, profit before tax is not a dimensionless value, and even it tends to end at the most unexpected moment, especially with an illiterate fiscal policy at an enterprise.

Therefore, it is important to objectively evaluate the policy pursued by the enterprise. This means that it is necessary to determine the balance of involvement inproduction of own funds, assess the risks that are in conflict with the current legislation, and also give a qualitative assessment of the implementation of the strategy in practice, because often not all of its points are observed.