Goals of tax reforms
The main goal of any tax reform is the formation of a perspective fiscal mechanism as the basis for the country's dynamic social and economic development. At the same time, it is necessary to emphasize that changes in taxation in the short run have a much smaller impact on achieving macroeconomic stability than monetary reforms such as changes in the exchange rate of the national monetary unit, the restructuring of monetary policy, etc. Consider the most significant tax reforms last time.
Goals of tax reforms in developed countries
In the 1950s. in countries with developed market economies, consistent changes in taxation were carried out following the reforms of the monetary system, wages, changes in pricing policy. These tax reforms were aimed at increasing the tax revenues of the budget for the speedy restoration of the war-ravaged economy and the re-equipment of production. Due to the tax redistribution of GDP, state financing of priority industries, support for the agro-industrial complex, participation in the capital of large private corporations, development of market infrastructure and social sphere were carried out.
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Since the 1960s. there was a change in the objectives of tax reforms. In the leading countries, they began to focus on achieving not only fiscal goals, but also to ensure state regulation of the economy and foreign economic relations, implementation of anti-crisis policies with limited social expenditure.
Thus, in the conditions of postwar limited material and financial resources, the transformation of taxation in the 1950-1960s. expressed the policy of tax dirigism and a rigid redistribution of GDP into the most important spheres of economic activity from the standpoint of national interests. In addition, the tax reforms carried out have created conditions for strictly targeted use of all financial resources of the state for long-term investments and solving the most priority social problems.
It is the tax reforms of this period that allowed the countries with market economies to make the transition from state budget subsidies and direct financing of individual industries and specific enterprises to tax management methods that contributed to the independent distribution by private corporations of the expenses for the expansion and technical re-equipment of their own productions. At the same time, a significant amount of tax benefits and privileges was actively used. The main objectives of the tax reforms carried out in countries with developed market economies in the 1950s and 1960s, are shown in Fig. 5.2.
Fig. 5.2. The main objectives of tax reforms in the 1950-1960's. in countries with developed market economies
In the 1970s. internal contradictions of the market economy, accompanied by a deterioration in the general conditions of reproduction in the industrialized countries, a decrease in the effectiveness of tax regulation and a slowdown in economic growth, were reinforced by sudden global energy and commodity crises. The ensuing multiplication of inflation, including not only relative but often absolute decline in the living standards of a certain part of the population of many leading countries, primarily due to the erosion of their incomes due to the prevailing increase in the inflationary component of tax deductions, effectively eliminated the economic expediency of using expansive tax methods regulation of market mechanisms. At the same time, in the financial sphere, characteristic signs were the growth of the deficit of national budgets, an increase in public debt.
The disproportions of national tax systems also increased. The tax systems of these countries in the current conditions ceased to fulfill the regulatory and stabilizing role, began to slow down economic growth, acting as a catalyst for inflationary processes. This was due to the fact that, with significant changes directly in the process of dynamic development of the market economy, the basic methods of tax regulation have not been transformed and traditionally focused on the evolutionary expansion of economic activity.
The changed economic conditions, especially the extreme tension of public finances, predetermined the need for new tax reforms.
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In this connection, the transformation of taxation in the 1980s. were aimed at the development of such tax methods that allowed to regulate economic development on the basis of a minimal state impact on market mechanisms of economic activity and enhance the competitive potential of market relations. The main objectives of the implementation of tax reforms in the 1980s. in countries with developed market economies are presented in Fig. 5.3.
These tax reforms were implemented mainly gradually and in stages in strict accordance with comprehensively theoretically worked out state programs.
The characteristic features of these reforms were the liberalization of the system of direct taxes and the increase in the scope of indirect taxation - consumption taxes. Despite the fact that certain changes were made during the reforms
Fig. 5.3. The main objectives of tax reforms in the 1980s. in countries with developed market economies
in the practice of all direct taxation, the most significant changes were made with regard to income and corporate taxes. For the reform of direct taxes, the provisions of the concept of the "supply economy" were used, which provides for the liberalization of the tax policy. The stimulating effect of the liberalization of the taxation system is, as we know, the Laffer curve. It is the threshold of the Laffer curve that represents the maximum permissible level of the tax burden, which does not undermine the growth of the tax base for the future.
However, the Laffer curve only shows this dependence, but does not give a clear idea of the maximum allowable amount of tax exemptions in the country's budget. This value can not be constant and sufficiently accurate, to an important extent, its level depends on the financial status of taxpayers in a particular country, the state of the economy of this country as a whole. Therefore, the basis for restructuring the system of direct taxes was the principle: it is better to have low tax rates with a minimum amount of tax benefits than high tax rates with numerous privileges.
According to the adopted concept, tax rates were significantly reduced in order to further stimulate economic growth. At the same time, the decrease in tax revenues was compensated by the parallel expansion of the tax base. Expansion of the tax base was provided both on the basis of the inclusion in the taxable income of more sources of this income, and the cancellation of a significant number of benefits, limiting the possibility of deduction of costs and subsidies.In particular, in the United States, unemployment benefits as a result of the reform were subject to income tax in full, benefits for medical care were restricted, discounts for the second working family member were abolished, the deduction of sales taxes, interest payments on consumer credit and certain types of bonds, etc.
In fact, the reform of the direct taxation system in all industrialized countries was conducted in two directions, two concepts of tax regulation were consistently implemented. Initially, the redistributive principle of income taxation was replaced by a stimulating one - tax rates for all categories of taxpayers were reduced by the same amount. Significantly reduced the time of depreciation in order to actually increase the volume of investments in fixed assets. Such a tax policy provided a certain economic growth, but only at the expense of strengthening the incentives of the wealthiest part of the population to save and invest money.
Then the transition from progressive income taxation to a limited proportion was implemented: instead of the pre-reform multi-digit scale, two basic income tax rates were introduced.
This tax regulation concept, based on a policy of substantial reduction of income and corporate tax rates while reducing and eliminating a significant number of benefits for these taxes, exerted on all taxpayers the impact of the "neutral" economic effect of tax deductions and contributed to the creation of a more extensive favorable investment climate.
Similarly, corporate tax reform was carried out. In general, during the reform, the rates of direct taxes were significantly reduced, the tax base was expanded, and the procedure for levying taxes was simplified.
For example, in Germany, from 27% in 1982 to 19% in 1989, the share of direct taxes and social insurance contributions, deducted from the gross income of production corporations, was reduced.
Separately, it should be noted that in Germany, a strategy for reforming direct taxation has also been made certain adjustments in connection with the accession to it of the Eastern Lands. In particular, a special "allowance for solidarity" was introduced. both to income and corporate tax in order to stimulate the economic development of new lands.
The reform of the British system of direct taxes was based on the following: low taxes make the economy more efficient. Corporate income tax rates in the UK have been reduced from 36 to 25%. That is why this reform, as well as in the US, was aimed at strengthening the neutrality of direct taxes and minimal state influence on economic entities of the market.
It is no coincidence that the American economist K. Ogden, who investigated the tax policy of the UK during the period when this country was Prime Minister of Thatcher: "Thatcherism is reaganomics without a deficit of the state budget."
The fundamental changes in the system of direct taxation have made it possible to considerably weaken state regulation of economic subjects of the market.
Reforms of the system of indirect taxes in the 1980s. were primarily determined by the liberalization of direct taxation.
In this regard, the main changes related to VAT. In comparison with any other tax, this tax has the least negative impact on the production and investment activity of commodity producers. The potential of VAT was maximally used to ensure the required level of the tax component of the state budget revenues. In particular, its rates were increased and the base of taxation was expanded.Other indirect taxes, such as customs duties and excise duties, in the course of the reforms under consideration have, as a rule, become important economic instruments in the implementation of integration processes. At the same time, customs duties were used on a broader scale to support domestic producers, and not for fiscal purposes of national budgets.
The fiscal thrust of excise duties also ceased to be dominant. First of all, they were used to cover the costs of combating smoking and alcohol consumption, building and maintaining roads. For this reason, as a rule, the change in excise tax rates during the ongoing tax reforms was not correlated with the costs of producing excisable goods and their value.
In general, indirect taxes, including VAT, customs duties, excise duties to stimulate capital activity and equalize competition conditions, have been harmonized within the EU.
As a result of these large-scale tax reforms in countries with a market economy, their tax systems, while remaining tools for the redistribution of GDP, have become more neutral. This became possible due to the fact that the predominantly redistributive methods of tax regulation of the market mechanism ceased to have a deterrent effect on the further socioeconomic development of countries.
The conducted tax reforms allowed, on the one hand, to transform those methods of tax regulation that hampered the further development of the economy, and on the other hand, provided an opportunity to identify new tax incentives that provided a steady extension of long-term investments in the promising production lines of both large corporations and a large part of the population.
On the whole, the reforms ensured the reorientation of forms and methods of tax regulation of investment and research activities. In particular, during the tax reforms in the 1980s. in order to ensure a real increase in the volume of long-term productive investments, a number of tax benefits were abolished and some of the benefits were abolished, which made it possible artificially to overstate the amount of depreciation as compared to actual transfers and, accordingly, to reduce the amount of taxable profit. For example, tax credits were reduced, the investment tax credit was canceled and other conditions were tightened.At the same time, to encourage the scientific and technical component of the activities of production firms and the development of their interaction with universities, a research tax credit was established, which is a reasonable tax benefit and allows private companies to reduce the amount of income tax by a certain fraction of the increase in their own expenditures for scientific- research and development work related to similar actual and documented costs in the base period.
In addition to more liberal and economically stimulating was the system of taxation of small and medium-sized private firms. In particular, significant tax privileges on capital gains were established.
As a result of tax reforms in the 1980s-1990s, along with a significant reduction in the total number of tax incentives aimed at increasing production volumes, the scope of tax incentives for scientific and technical investments was expanded.
Currently, in countries with a market economy, tax reforms are inherently a constant process of improving national tax systems, continuous development of current trends in the state tax policy. The main objective of modern tax reforms in post-industrial countries is the development of a single tax instrument for precautionary regulation of market processes, which is reflected in the further unification of the taxation system, convergence of tax rates on the incomes of corporations in different sectors of the economy and the application of similar forms of tax incentives.
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