Вопросы совершенствования анализа налогов

K Хотамов

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K.Khotamov,

senior researcher of the Banking and

Finance Academy of the Republic of Uzbekistan

ISSUES OF IMPROVING ANALYSIS OF TAXES

Key words:

indirect taxes, value added tax, direct tax, tax rate, market price

for one item, cost of sales of the overall production, quantity of goods produced,
profit of company, tax burden.

In modern economies taxes are considered the main financial source for

regulating economy as well as social, economic and political activities of the
government. Taxes comprise the method of formulating the state budget and taxation
can act as the factor influencing the development of this or that process.

In foreign practice according to the economic essence taxes are divided into

direct and indirect taxes.

Direct taxes are levied directly from the object of taxation and the owner of the

income of the property can act as the taxpayer of the direct taxes. Indirect taxes are
the taxes which are added to the price of goods and services so the taxpayer of
indirect taxes is a final consumer of goods and services on which shoulders the tax
burden falls. So companies add indirect taxes to the price of manufactured goods or
services and then remit the amount of taxes to the budget.

Nowadays indirect taxes are widely used as the main source of the budget

revenue. Economic activity of businesses, in turn, is also encouraged by direct taxes
which formulate the revenue part of the state budget.

There are various approaches to the classification of taxes into direct and

indirect. Russian scientist, A. Nachalov has stated that âIndirect taxes are taxes which
are accrued to the price of goods and services by central and local governments. They
are not connected with the income of the taxpayer and are added as special tariffs to
the price of goods and servicesâ [1].

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According to the opinion of English economist and statesman John Stuart Mill

âIf direct taxes are charged from the taxpayer himself, the tax burden of indirect taxes
is shifted to the taxpayer by other personsâ [2].

Former Minister of Finance of France Joseph Marie Terray has noticed that

âindirect taxes are levied graduallyâ [2].

So we can make a conclusion that indirect taxes are added as an additional cost

to the manufactured goods, accomplished works and rendered services. They are
compulsory indirect payments to the state budget in the form of additional costs in
the structure of the turnover.

The object of indirect taxes is the value of sold goods, accomplished works and

rendered services. It is connected not with the income or profit received, but is
referred to additional cost accrued to the value of turnover. In this case, the value of
manufactured products, accomplished works and rendered services should be
converted into goods.

Producers of goods and services are considered legal payers of indirect taxes.

However, at the end of the process, legal persons or individuals consume those goods
and services which comprise the object of indirect taxes.

Therefore in the opinion of the enterprise it is not so important to distinguish

direct and indirect taxes from the point of view of their economic and social role.
Irrespective of the fact, if they are direct taxes or indirect taxes, they are considered to
the revenue source of the budget. Anyway their taxpayers will be consumers â either
legal persons or individuals.

Nowadays in the structure of the budget revenue the share of the Value Added

Tax (VAT) is the biggest.

The VAT was implemented in the tax practice in some countries of Western

Europe in the 70s of the XX century. The reason and legal foundation for this was
adoption of the special resolution on uniting all existing legal norms on charging the
VAT in the territory of countries â members of the European community. This
resolution was adopted in 1977 and according to this document the VAT was
considered the main type of indirect taxes.

According to the economic literary sources France was the first country in the

world where the VAT was introduced. In 1977 in compliance with the adopted
resolution the VAT was introduced in several European countries at the same time.
The VAT played a big role in establishing and developing integration processes in the
countries of Western Europe so this tax was named as âEuropeanâ tax.

Nowadays the VAT also plays a big role in formulating the revenue part of the

state budget in the countries â members of the European Union. The role of indirect
taxes in Europe is significantly bigger that the role of these taxes in the USA, Japan,
Canada and Australia. In European countries the share of indirect taxes amounts to
more than 40% in the volume of the overall tax revenue and in some countries like
Mexico, Turkey and Korea it accounts for more than 50%. In the USA, Japan,
Canada and Australia this indicator equals to 25-30%. The main reason for high share
of indirect taxes in the structure of the tax revenue in countries â members of the
European Union is generalization of tax rates in these countries and their mutual
harmonization with the taxation base.

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This issue has a practical importance for the Republic of Uzbekistan because

the major share of goods turnover belongs to Russia, the Ukraine and the Republic of
Kazakhstan. For the time being the problem of generalizing the rates of the VAT
between these countries and harmonization of the tax base hasnât been solved yet.
This, in turn, can prevent development of foreign trade relations between these
countries.

The VAT has been implemented in practice of the Republic of Uzbekistan

since 1992. This tax was introduced to replace the tax on turnover and tax on sales.
The difference between the VAT and turnover tax is that the VAT is charged at each
stage and a final tax burden falls on the taxpayer. However, the turnover tax was
levied only once on the overall turnover.

The main reason for introducing the VAT in Uzbekistan was the experience of

the world community in imposing this kind of tax. As the practice of advanced
foreign countries shows, accounting of indirect taxes was developing and the VAT
has turned to be the tax which does not disturb the sale of any goods and does not
change finance distribution in economic activity. From the point of view of scientists,
the practice of the Value Added Tax has advanced the theory of the VAT and the
share of indirect taxes is significant in the budget structure of some countries.

In Uzbekistan the rate of the VAT accounted for 30% in 1992, in 1996 it was

reduced to 17%. In 1997 the rate amounted to 18% and a reduced rate of 10% was
applied to some food products (flour, bread, meat, milk and dairy products). In 1999
Uzbekistan applied 3-level VAT rate of 20, 15 and 10%. Only 3 items â export,
mineral fertilizers and oil for agricultural needs and goods (services) realized by
diplomats were imposed the VAT at zero rate. The VAT at 15% rate was levied on
flour, bread, meat, milk and dairy products and imported cattle and grain. Since 2000
up to now 20% rate and zero rated have been applied in Uzbekistan.

The VAT is levied at each stage of the process of purchase, production,

distribution and realization of goods, rendering services from the value added. In
practice if the government or the enterprise are the final consumers the total tax
burden of this tax falls on the enterprise. In these cases economic entities pay the
VAT not from the value added but from the overall turnover. We should always keep
in mind that the value added is the overall turnover for the final consumer. Taking it
into consideration we can make a conclusion that the VAT is the tax imposed on the
value (turnover) added in the process of production, offering services or sale because
as we have mentioned above if the final consumer is a legal person, the VAT is
considered to be the tax levied on the overall turnover.

If we generalize the points of view of scientists mentioned above, we can make

a conclusion that the VAT is an indirect tax, its burden is shifted to the taxpayers by
others, and its real burden falls on the consumer at the end. We will try to analyze the
impact of the amount of tax on the financial position of any enterprise and to give our
opinion on this point.

While analyzing the factors influencing on the amount of taxes it is

recommended to consider the impact of the amount of the VAT on financial position
of the enterprise. Nowadays the higher share of the VAT in the budget revenue is the
more dependents budget has. The followings can be referred to the dependent:

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ï·

Due to the non-accurate organization of the order of charging the VAT giving

tax benefits to some enterprises will lead to the increase of the amount of the VAT
paid;

ï·

Non-compliance between advance payments of the VAT and the time of its

charging from consumers.

While analyzing the VAT we should take into account the following:

ï·

impact of the VAT on the funds of the enterprise and results of its financial

activity;

ï·

Reduction of turnover funds (advance payments for raw materials and

inventories). We are going to give our opinion on the following problem basing on
the analysis of the following table.

Table 1.

Order of analyzing impact of the VAT on the financial position of the company

on the basis of the turnover

Indicators

A

enterprise

B

enterprise

Difference

(+; -)

1

2

3

4

Cost of the commodities and raw
materials purchased, thousand UZS

800000

1000000

+200000

Amount of the VAT paid, thousand UZS

160000

200000

+40000

Period of production, days

30

-

Quantity of goods produced, kg.

1500

1800

+300

Money spent on one item, thousand UZS

700

750

+50

Total value of production, thousand UZS

1050000

1350000

+300000

Cost of sales, thousand UZS

1200000

1500000

+300000

Calculated amount of the VAT, thousand
UZS

240000

300000

+60000

Proceeds from the sale of the product,
total

1440000

1800000

+360000

VAT paid to the budget, thousand UZS
(8-2)

80000

100000

+20000

Source: Developed by the author basing on the results of the research.

If we analyze the figures stated in the table no impact of the VAT during the

process of production is supposed to be observed. However, the period of
manufacturing accounts for 30 days and circulation of turnover funds influences on
the financial position of the enterprise in the process of charging the VAT from the
consumers and remitting them to the budget. This enterprise is not considered to be
the final consumer so we are proposing the following analysis:

1.

If we divide the cost of sales of products into a number of goods produced

we will get a market price for one item.

âAâ enterprise:

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M

P

= C

S

/ Q

G

.

where

M

P

= market price for one item;

C

S

= cost of sales of the overall

production;

Q

G

= quantity of goods produced; so:

M

P

= 1200000 / 1500 = 800 UZS.

Cost of sales for one item differs from the cost of production of one item by

100 (800 â 700) thousand UZS.

âBâ enterprise:

M

P

=C

S

/ Q

G.

where

M

P

= market price for one item;

C

S

= cost of sales of the overall

production;

Q

G

= quantity of goods produced; so:

M

P

= 1500000 / 1800 = 833.3 UZS.

Cost of sales for one item differs from the cost of production of one item by 83

(833 â 750) thousand UZS.

2.

If we divide advance payment of the VAT (A

VAT

) into the cost of production

of one item (C

P

)we will get quantity of conditionally produced goods (QCPG):

QCPG = A

VAT

/ C

P

â

Aâ enterprise:

QCPG = 160000 / 700 = 228.6

Profit of company = QCPG * Profit = 228.6 * 100 = 22860 thousand UZS;

â

Bâ enterprise: QCPG = 200000 / 750 = 266.6

Profit of company = QCPG * Profit = 266.6 * 83.3 = 22207.8 thousand UZS.

So if we analyze intermediary activity of the enterprise by the VAT we can see

that profit of âAâ enterprise reduced by 22860 thousand UZS, âBâ enterprise - by
22207.8 thousand UZS. As a conclusion we can say if the VAT didnât exist at all
profit of the enterprise would be higher.

In the result of calculations the profit of âAâ enterprise accounts for 150000

thousand UZS, the loss in relation to profit occurred during the period of circulation
of turnover funds due to the VAT equals to 15. 24 per cent (22860 / 150000 * 100),
while of âBâ enterprise amounts to 14.8 per cent (22207.8 / 150000 * 100).

We can observe reduction of the VAT by 15% from the profit. This process

considerably impacts on financial position of the large manufacturing enterprises,
companies involved in export operations, and agricultural companies.

Therefore it is rather difficult to say that the VAT paid by the enterprises

doesnât influence on the financial position of the enterprise. In the enterprises with
quick turnover this influence is slightly less.

On the other hand, while analyzing tax burden usually only really paid taxes

are taken into account. In many scientific papers the VAT is considered to be an
indirect tax and its burden completely falls on the final consumer.

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Basing on the data stated above, we can make the following conclusions:
1.

In our opinion, when the enterprise which doesnât pay the VAT purchases

fixed assets or intangible assets the VAT added to their value should be taken into
account while analyzing taxes and calculating the tax burden. The reason for it is that
irrespective of the terms of payment of the VAT, anyway, it is transferred to the
budget.

2.

In our opinion, each taxpayer feels the burden of the VAT impact.

3.

It is necessary to take into account analytical information when accounting

the VAT at the economic entities. We believe that timely and correct preparation of
the accounting balance and income statement, accounts of the VAT will facilitate
analysis of the VAT, and, as a result, timely provision the revenue part of the state
budget with the taxes.

Reference

1.

A. Nachalov. Tax Dictionary. Moscow. Tax â Info, 2004. - 102 p. (in

Russian)

2.

A. Chernika. Taxes. Moscow. Finance and statistics, 1996. â 17-18 p. (in

Russian).

Вопросы совершенствования анализа налогов

Ключевые слова:

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