Conceptual foundations for determining the tax burden in Russia: genesis and modern paradigms

Orobinskaia Irina Viktorovna Doctor of Economics Associate Professor, Taxes and Taxation Department, Voronezh State Agricultural University 394087, Russia, Voronezh region, Voronezh, Michurina str., 1 orob-irina@yandex.ru Other publications by this author     Pil'tsina Marina Viktorovna PhD in History Associate Professor; Faculty of Economics; Voronezh State Forestry University NAMED after G.F. Morozov 11 Rimsky-Korsakov St., Moscow, 127566, Russia pmvistoria@mail.ru

Semenova Kristina Evgen'evna Master's degree; Faculty of Economics; Voronezh State Agrarian University named after Emperor Peter I 309900, Russia, Belgorod region, village of Livenka, Gagarina str., 12 orob-irina@yandex.ru

Introduction

The paradigm of determining the tax burden of an organization involves the study of a system of views, concepts and methods used to analyze and assess the degree of tax burden borne by individuals and legal entities. It includes various approaches to changing and interpreting the tax burden, as well as factors affecting its magnitude. The main aspects of the paradigm of defining this category may include measurement methods, namely various ways to assess the tax burden; comparative analysis; economic consequences, social aspects; political factors and the historical context (how the tax burden has changed over time and what historical events influenced it). It should be noted that the genesis of the tax burden is a complex and multifaceted process that continues at the present time. It depends on historical conditions, economic changes, social expectations, and political decisions, making it an important topic to study in economics and finance.

It is well known that the state needs funds to fulfill its obligations to citizens, such as providing social protection, healthcare, education and infrastructure. To do this, it uses various sources of financing: government loans, receipts from state-owned enterprises, etc., but the main source of state income is tax payments. The payment and transfer of taxes to the budget is regulated by the legislation of the Russian Federation. However, it should be noted that if the tax deductions are too large for the organization, this will negatively affect its profits and profitability. In some cases, this may lead to the closure of the organization, as entrepreneurs do not see the point in continuing their activities due to low incomes and lack of motivation.

In order to prevent the above situation, a detailed analysis of the organization's performance in the future is required, as well as the necessary calculations of the tax burden. In order to characterize the methods of determining the tax burden, it is necessary first to consider the very concept of "tax burden".

The results of the study

The appearance of the tax burden in the past centuries did not have any consistency. Taxes were paid without a specific scheme or any explanatory documents. In other words, taxes were collected haphazardly. This approach to the tax burden has prompted researchers and economists to search for tax theories on the basis of which it would be possible to create a specific tax payment system. Thus, the Scottish economist A. Smith, in his scientific work "Research on the Nature and Cause of the Wealth of Nations" published in 1776, concluded that the size of the state budget depends, among other things, on how many taxes it received. Thus, A. Smith identified a direct relationship between the level of the tax burden and the formation of the budget. He wrote: "With a reduction in the tax burden, the state benefits more than from imposing excessive taxes; additional income can be generated on the released funds, from which taxes will be paid to the treasury. At the same time, taxpayers will make these payments more easily, which will free the state from additional tax collection costs associated with punishments and extortion" ^{[6, p. 307]}.

The period of the XVIII—XIX centuries is notable for the fact that it was at this time that research was conducted by scientists and economists from different countries regarding tax collection. The researchers aimed not only to determine the level of their influence on the development of the country's economy, but also to create a specific algorithm for calculating the size of the tax burden. F. Justi, in the process of studying taxes, came to the conclusion that the budget and national income of the state are inseparable from the tax burden and are directly dependent on it. Thanks to his research, the scientist calculated that budget expenditure can be as much as 1/6 of national income. This indicator should not be higher.

A. Bifeld investigated the level of the tax burden based on the possibilities of taxpayers. In the course of his research, the author suggested that the amount of tax obligations in favor of the budget on the part of the taxpayer can be as much as 1/4 of the latter's income. A. Bifeld emphasized: "A sound policy determines 25% of everyone's income. If you demand more of this, then, I think, the people will be exhausted, and if less, then there will not be enough for all government expenses" ^{[5, p. 100]}.

After some time, the study of the tax burden went beyond theory, and attempts were made to put the theory into practice. In their calculations, the researchers relied on the direct impact of the tax burden and budget revenues, and how this together affects the development of business entities. It is worth noting that for each state the amount of tax deductions to the budget is different, because countries have different obligations to the population and the economy. So, in one country, the state does not provide citizens with free medicine, in another there are not so many social guarantees and provisions, etc.

Based on the above, it can be concluded that in the process of conducting tax policy, each state relies on its own analyses and calculations when determining the amount of tax payments to the budget.

The tax burden is defined as the percentage of taxes paid in the total revenue of an organization. It is worth noting that not only the economic services and the management of the organization analyze the tax burden, but this information is also of interest to other organizations, in particular:

1. Financial and credit institutions, based on data on the tax burden of an organization, decide whether it is able to repay an approved loan. In addition, this indicator indicates how reliable the organization is in terms of debt repayment.

2. Information on the tax burden to the Federal Tax Service allows for the preparation of a schedule of on-site tax audits, as well as the identification of business entities that evade taxes.

3. The Russian Ministry of Finance, receiving information on the tax burden, draws up a plan that will contain steps aimed at improving the economic situation in the country and improving the standard of living of its citizens.

In the Russian Federation, there are five methods for calculating the tax burden on an enterprise, which, in our opinion, are quite effective, each of which has its own distinctive features and is used in different situations, depending on the type of production and its activities (Table 1).

Table 1 – Interpretation of formulas and methods for calculating the tax burden of an enterprise ^[21]

The first method is the generally accepted methodology of the Ministry of Finance of the Russian Federation, which was developed by the Ministry of Finance of the Russian Federation for legal entities and individual entrepreneurs, respectively.

According to the letter of the Federal Tax Service dated 06/29/2018 № BA-4-1/12589@ "the payment procedure is as follows:

– the amount of taxes paid includes personal income tax transferred by the organization to the budget for its employees;

– insurance premiums for compulsory insurance are not included in the estimated amount of taxes;

– revenue from the sale of finished products, works, services and other income is shown minus VAT and excise taxes;

– for insurance premiums, the tax burden is calculated separately and represents the ratio of paid insurance premiums to the organization's revenue" ^[2].

This technique has both advantages and disadvantages. The main advantage lies in the ability to assess and characterize in detail the share of taxes paid on the revenue of various business entities, that is, to identify items of expenditure in the enterprise. One of the main disadvantages of the methodology of the Ministry of Finance of the Russian Federation is that the studied methodology does not reflect the impact of tax obligations on the tax burden, that is, on the financial condition of the enterprise as a whole. This is often due to the fact that this technique does not take into account the volume of newly created value, as well as the costs that arise in the process of its creation.

Thus, the studied calculation methodology does not allow us to accurately determine the level of tax liabilities for an enterprise. Therefore, for a more accurate assessment of the financial condition of the organization, as well as tax payments and determining their level, other methods should be considered that will take into account the newly created value and material costs incurred in the course of the activity. All this will further allow the company to plan its financial obligations most effectively and make informed decisions.

An annual report on the tax burden by industry of organizations is published on the FTS website. Table 2 shows data for 2022-2023.

Table 2 - Tax burden by industry for 2022-2023 ^[3]

As can be seen from table 2, the tax burden in 2023 increased for almost all sectors of activity. The exceptions were the water supply, sanitation and waste disposal industries, as well as the hotel business and catering, whose tax burden decreased by 0.2% and 0.4%, respectively.

These indicators are a guideline for both taxpayers and the Federal Tax Service. If the taxpayer's tax burden is lower than the industry average, then he needs to provide explanations to the tax service about the reasons, otherwise, the tax service may initiate an on-site tax audit in order to identify tax evasion schemes.

At the same time, a lower tax burden compared to the industry average is not always associated with illegal actions. Sometimes there may be the following reasons for this:

1. Availability of tax benefits for the taxpayer.

2. The use of a special tax regime.

3. Decrease in the organization's revenue due to the large number of competitors.

The disadvantage of the method of calculating the tax burden, which was announced above, is that it does not take into account all the mandatory payments that the organization pays. The fact is that the tax burden includes the following taxes: VAT, personal income tax, income tax, mineral extraction tax, property and transport taxes, and insurance premiums are not included in this group. It should be noted that since 2010, the unified social tax (UST) has been replaced by insurance premiums, respectively, employers began to transfer contributions for their employees to extra-budgetary funds directly, bypassing tax authorities. In our opinion, despite the fact that insurance fees are not tax payments, they have a fairly large percentage (the basic tariff is 30%) of the total volume of mandatory payments of enterprises. As a result, the management of the organization cannot get a real picture of the costs of fiscal obligations. If insurance premiums are considered as mandatory payments, then their inclusion in the amount of the tax burden makes the tax system more equitable.

Depending on the form of business organization and the taxation system, the formula for calculating the tax burden takes into account different taxes and incomes. Table 3 shows the calculation of the tax burden of organizations with different forms of doing business.

Table 3. Formulas for calculating the tax burden ^[4]

In addition to the industry indicator, the Federal Tax Service, when analyzing the tax burden, pays attention to the dynamics of personal income tax payments. The organization will also need to explain if personal income tax has significantly decreased compared to last year, as well as if the average salary level is below the minimum wage, starting in 2024 it is equal to 19,242 rubles.

Thus, it can be concluded that the methodology used to calculate the tax burden is reflected in the Concept of the planning system for on-site tax audits, approved by Order of the Federal Tax Service of Russia dated 05/30/2007 № MM-3-06/333@. The size of the tax burden is of interest not only to the organization, but also to the Federal Tax Service, the Ministry of Finance of Russia and banks.

There is a general formula for calculating, but the tax burden can also be calculated based on the form of doing business and the applicable taxation system. The disadvantage of this technique is the absence of insurance premiums in the calculation, which are also paid by the organization, which, in turn, does not allow to get a real picture for further analysis. Nevertheless, an organization can independently calculate its tax burden for further analysis of its activities, selection of a tax system, and planning further measures to improve its financial situation.

The methodology for calculating the tax burden developed by M.I. Litvin is universal, as it can be applied to any organization, despite the chosen special taxation regime, and also characterizes the ability of any business entity to determine the proportion of tax payments that it is required to pay from a specific source. It should be noted that the application of this technique is accessible to all enterprises, as it requires low costs.

In practice, this methodology allows you to take into account the distinctive features of organizations and optimize financial performance most effectively, as well as calculate tax liabilities with high accuracy. The disadvantage is that the category under study does not take into account the impact of personal income tax when calculating the tax burden of an enterprise, which in the future may lead to a distortion of the real tax situation and create an incorrect picture of the level of taxation of the enterprise.

Let's consider the following methodology developed by E.A. Kirova, where the absolute indicator of the tax burden is the total amount of tax liabilities that are "shouldered" by the organization. The author of the methodology suggests paying attention to the indicator of the relative tax burden in order to get a full and complete picture of the tax component of the business entity under study.

One of the advantages of this technique can be identified, which is that it is not susceptible to the influence of certain industry specifics or the scale of the enterprise, which allows any business entity to use it regardless of the specifics of its industry or the size of its organization. Accordingly, there are also disadvantages of the methodology, one of which is the inability to predict the indicator of the tax burden for the future, which can create certain kinds of problems that negatively affect the development of the organization.

M.N. Kreinina is the author of the following methodology, which provides for the possibility of determining how much net profit can be used to pay tax obligations.

Using this methodology allows you to thoroughly delve into the study of the position of specific types of taxes in the dynamics of tax payments for a certain period, as well as evaluate the effectiveness of the applied tax planning methods.

In addition, attention should be paid to the fact that this method is not suitable for enterprises with a low level of profitability, such enterprises require special approaches to taxation aimed at accelerating their development and maintaining competitiveness in the market of goods and services.

A. Kadushin and N. Mikhailova are the authors of the latest methodology, which we reviewed during the study. This type of methodology involves the use of a special tool for the effective assessment of the tax burden with maximum accuracy, called value added, which in essence reflects the very tax burden of the organization.

Conclusions

Thus, in the course of the study, we found that there are a diverse number of methodologies for calculating the tax burden, which are selected by the organizations themselves, based on their own characteristics, since the Tax Code of the Russian Federation does not provide for legally established methods. Nevertheless, in our opinion, the preferred method of calculating the tax burden by taxpayers is to use the method proposed by the Ministry of Finance of the Russian Federation, which reflects the ratio of the amount of taxes paid to the revenue of the organization, which will identify the negative aspects and prevent the occurrence of an on-site tax audit.

As suggestions for improving the methodology for calculating the tax burden, we can recommend using an integrated approach that will take into account absolutely all mandatory payments and contributions paid by business entities, as well as the interests of various user groups.