Tax rate - the achievement of optimum values, which do not impede entrepreneurial activities

For a more complete presentation of the essence of the tax rate used as an instrument of tax policy at the state level, it is necessary to define some terms.

Therefore, taxes represent compulsory payments of natural and legal persons to the state budget of all levels with the established current legislation of the time. The collection of all taxes in the country forms a tax system that is based on state legislative acts. These regulatory documents establish the components of taxes: object of taxation, subject and tax rate.

In turn, the tax rate is divided into the average, marginal, effective, reduced and zero. Average tax rate represents the ratio of total tax to income subject to taxation. The marginal tax rate shows the ratio of growth of paid taxes to income growth. The effective tax rate equals chastnomu by the division of the payable in the course of business activities of additional revenue by the amount resulting from activities income.

Comparing the average tax rate with the income, it is possible to define the following methods of implementation of the tax: progressive in which the observed rate increases with increasing earned income; regressive, providing for a reduction in rates with increasing income; proportional, ensuring the permanence rates regardless of income earned in a particular period.

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When compared to application of these methods, you can see that the progressive tax system may entail tax evasion, and payers will do everything possible to reduce their income. This is achieved by adjusting the volume of expenditure, and while everything happens within the framework of the current legislation because of its imperfections.

A Vivid example of the use of effective tax rates can serve as the transaction of gift, after which the tax authorities recalculated the tax paid. And then the tax rate will be slightly different from the original.

Question on the tax rate is always the subject of debate scholars, politicians and economists. So, quite a long time followers of the theory Keynes argued that the decline in aggregate demand will occur at a high level of taxes. As a result – the government has the reduction of prices and damping inflation.

The Other side disputes the data that support the theory of “economy”, shows quite the opposite. High taxes can increase the costs of business entities, which, in turn, their shift to the end consumer through higher prices and higher inflation. In support of the above A. Laffer formulated the relationship between the tax rate and budget revenues in the form of a curve which has received the name of the author. The economic meaning of this graph lies in the ability of growth in tax revenues due to the increase in the amount of tax to be revenue. However, this process must continue until a certain level, above which observed a sharp decline in the activity of economic entities, and their further activity becomes unprofitable. At much lower rates, favorable conditions for work, entrepreneurship, savings, investment and the expansion of the national production. The result of this process is the broadening of the tax base, contributing to the increase in tax revenue, despite the fact that the tax rate will be low.