UNIT 5 Taxation

Taxes are a compulsory financial contribution by a person or groups of persons to the expenditure of public authorities. In modern economies taxes are the most important source of government revenues. Taxes imposed on income (on wages, salaries, profits, dividends, rent, interest) and on capital are known as “direct” taxes. Taxes on commodities or services are known as “indirect” taxes.

Taxes have three functions:

- fiscal or budgetary, to cover government expenditure, to provide the public authorities with the revenue required for meeting the cost of defence, social services, interest payments on the national debt, municipal services, etc;

- economic, to give effect to economic policy, to promote stable economic growth;

- social, to increase the economic welfare of the community.

Businesses and individuals are subject to many forms of taxes. The various forms of business organizations are not taxed equally. The tax situation is simpler for proprietorships and most partnerships while companies are levied differently.

Russian taxes provide revenue for three tiers of the budget: federal, regional and local.

The major taxes paid to the budget are: profit tax, value-added tax, securities tax. Tax

returns are audited by tax authorities at the time they are submitted.

If a company or a person assessed believes the assessment is incorrect in any way, an appeal may be lodged against it. The appropriate financial organ is required by law to reply to such an appeal within five days.

We should say that along with cases of illegal evasion of tax obligations there are legal ways of avoidance by which a person or a business may so arrange affairs as to minimize or even eliminate tax liability on property and income.