Each business entity in the implementation of operating activities is faced with the practice of taxation. Therefore, for successful business, not contradicting the current legislation, it is necessary to clearly understand not only the essence of this concept, but also conduct a competent fiscal planning policy . In the article below, we will talk about the basics of this system and some rules that competent entrepreneurs must adhere to.
The essence of taxation
Few people know that taxation is the oldest word that previously literally meant sacrifice, slave labor, and even war trophies. From time immemorial, the state treasury was replenished with all sorts of ways, by the way, not always humane. Each capable citizen simply had to pay tribute to the government for the fact that he could earn a living from himself and his family in this territory.
But over time, legal awareness in society grew, and the state came to understand more humane and regulated ways to replenish its own treasury. Therefore, today taxes are not only a tribute and strengthening of the state budget, it is a deliberate 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 for which the entrepreneur or any person making a profit is obligated to pay the state. Despite the mandatory payment, in the vast majority of cases this procedure is voluntary, which indicates a high level of legal awareness of modern citizens.
Tax principles
Taxation is a comprehensive and structured state-regulated system that operates within the framework of legislation.
So, in the Russian Federation there are a number of principles that this economic institution complies with:
- Universality. This means that the treasury must replenish all, both individuals and legal entities that meet the requirements of the Tax Code. By definition, taxation is not discriminatory.
- Equality. The tax burden is distributed in accordance with the capabilities of each entity and is regulated through benefits.
- Clarity. The legislation is interpreted in a consistent way, so each payer can find the information necessary for himself in the Tax Code.
- Legality. The state provides for a number of grounds, on the basis of which, a person is obliged to pay a share of profit to the treasury.
Taxation methods
Taxation is a process that is regulated by state policy simultaneously in several directions. One of these is the methodology for calculating the tax burden on business entities. The latter is 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 is a continuous process of regulating the volume of treasury. So, fiscal techniques include the following:
- Equal. This means that for each business entity an identical burden is imposed on others. It is practically not used at the moment, because it is obsolete.
- Regressive. It is characterized by a decrease in the tax rate in accordance with the growth of the treasury base. It is often used if the level of the budget depends on a clearly defined amount, and not on the level of income of the population.
- Progressive. Acts back from regressive, is actively used in the Russian Federation.
- Proportional. It is characterized by a solid 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, for the organization of this process with the development of legal awareness, the society arose new types of fiscal fees, which were further divided into subspecies.
Among these, the following can be distinguished:
- By the method of payment: direct (proportional to income) and indirect (expressed as a premium on the value of the goods that consumers cover). Also in practice, a simplified taxation system is used (this is a special regime for small businesses).
- According to the specifics of use: general (levied to finance national purposes), special (have a narrow focus of coverage - for example, when paying taxes on fuel and lubricants, funds go to road funds).
- At the place of distribution: state (paid to the central authority of the fiscal service) and local (intended to cover expenses of an intracity nature).
Taxation functions
Taxation is a continuously operating mechanism that performs a number of functions:
- Fiscal activity. It is the main one and consists in the process of regulation and the formation of state treasury funds for their further competent and uniform distribution with respect to local needs.
- Distribution activity. It is also called social, because it performs an equalizing 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 costs of unprotected categories of society.
- Regulatory activity. It maintains a balance between economic processes within the state, and also accumulates funds to fill in financial gaps in a particular state sector.
The essence of the tax policy of the enterprise
For an entrepreneur, the object of taxation is his own earned profit, and therefore, as a rule, I don’t really want to share it. In order to minimize costs and eliminate the risks of violation of the law, it is important for the business entity to choose a competent tax policy. This set of measures must be adhered to during the implementation of operational activities.
In its formation, the tax policy of an enterprise relates to the following areas of activity of a business entity:
- first you need to determine the feasible burden of the fiscal burden, and then - with the type of activity;
- then you should decide on the schedule and deadline for paying obligations to the budget, which will become as comfortable as possible for timely execution within the framework of the current legislation;
- the last thing to consider is investing issues, as well as the methodology for distributing the company's net profit (do not confuse it with the term 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 the funds paid to the treasury of the enterprise by the business entity to the total mass of revenue received for the reporting period. This is probably the most sensitive issue among entrepreneurs, since it does not concern only 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, liability for property) and greatly simplifies the operating activities of the entrepreneur.
As for other business entities, they must constantly monitor the tax burden ratio relative to revenue, cost of sales and total value of assets involved in the production. In the case of a significant share in 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 company needs measures to improve its tax strategy. Often, this procedure applies only to those business entities that pay more than a third of the amount of value added for manufactured products to the state treasury. Since in this case they not only lose a considerable share of net profit, but also spend the resources of obsolete funds on a monthly basis. Indeed, profit before taxation is not a dimensionless quantity, and even it tends to end at the most unexpected moment, especially with an illiterate fiscal policy in the enterprise.
Therefore, it is important to objectively evaluate the policy pursued at the enterprise. This means that it is necessary to determine the balance of involvement of own funds in the production, to assess the risks that are in conflict with the current legislation, and also to give a qualitative assessment of the implementation of the strategy in practice, because often not all of its points are observed.