Taxation - delicate instrument

Business Materials 16 April 2009 11:19 (UTC +04:00)
Taxation - delicate instrument

Azerbaijan, Baku, April 15 / Trend /

Leyla Abdullayeva, expert of Trend Analytical Center

Azerbaijan's Ministry of Finance proposed reducing direct tax rates, in particular, the maximum rate of income tax, which will significantly enhance its collection. Under the current 35 percent maximum rate of income tax in Azerbaijan, department for preliminary investigation of tax crimes of the Ministry of Taxes periodically detects tax evasions. In 2008, 191 criminal cases were filed against physical and legal entities on the facts of tax evasion, illegal entrepreneurship and other violations.

Draft amendments and supplements to the Tax Code have been prepared since the beginning of 2008, and the reports are planned to be submitted to the Parliament by May 15, 2009.

Reducing income tax, which is one of the main sources of income of state, requires accurate calculation of the efficiency and losses from the reduction of each percent, as well as reducing the tax rate may affect those industries that are primarily dependent on those revenues. This is mainly health and education.

Taxation in general is so thin instrument that any changes could affect several spheres of the country's economy at a time. Logically, if the tax becomes less, the real wage increases, people will have more money to spend and the opportunity for additional cost.

The income tax rate is constantly declined in European and Baltic countries. For example, as of 1 January 2008, Estonia and Lithuania reduced the rate of income tax from the population. In addition, its reduction will occur in 2011, by 1 percent annually. Over the next three years, the tax rates in those countries will decrease to 18 percent. Now, most of countries, which are interested in reducing the tax burden and providing a boost to the economic growth, try to establish single income tax rate. Azerbaijan moves in this direction.

If the taxes are reasonable, and the control is total, the overall traffic of revenues will increase significantly. Permanent revenues must be ensured for the Republic through appropriate tax rate and inevitability of punishment for non-payment.

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