Käibemaks ja selle rakendamise praktilisi probleeme
Unlike a lot of other taxes value-added tax (VAT) has an impact on most people, who are either tax bearers or taxpayers. Taxation should be considered the sign of independence of the state. Taxation is also a part of the general fiscal and economic policy of the state. Tax collection into the state budget makes it possible to fund public expenditures and redistribute income. Taxation forms an economic measure as well. It can be used to affect consumption, increase saving and develop the structure of the business sector. Knowing the principles of taxation is an essential factor in expanding entrepreneurship. As to taxation, the legislation in Estonia does not provide the agreements with tax authorities and the neglect of the taxation conditions may cause irrecoverable loss to the economic agents. Tax policy makes it possible to influence the welfare of different social groups. Tax application can bring about essential social differentiation, but its purposeful and rational application, which is based on comprehensive studies, may relieve it. The aim of the present paper is to study the value added tax, one of the bestregulated taxes in the European Union, and some practical aspects and problems of its imposition in Estonia. The paper as a whole is innovative as it includes a survey of the history of VAT, the analysis of the terminology and most essential problems in imposing the VAT and the methodology used in making special arrangements. The paper also comprises formulas devised by the author and combined into integrated computing methods. These methods are used for calculating VAT in travelling services special arrangements. The novelty of the current paper is emphasized by the analysis made by the author concerning the possibility of VAT rate reduction for food and non-alcoholic beverages and its impact on the household welfare in Estonia. The current paper is compiled as textbook – monograph. In order to perform the analysis, the author has set the following objectives: • study the theoretical basis of taxation and consumer taxes and the historic development of VAT imposition; • analyse the terminology used in VAT Act and some practical problems in imposing the VAT; • analyse the impact of a decrease in the VAT rate on the household welfare. The present paper analyses the history of VAT as a general consumption tax in two different economic regions in the world — in the United States of America and the European Union. The author of the paper has also analysed different factors that have an essential impact on taxation. The concurrence of political decisions and legislative acts on the taxation policy as well as on the taxpayer’s well-being was under observation. The paper presents an analysis of the changes induced by VAT reduction on the income of the households as compared to alternative variants. As an alternative, the impact of an increase in the basic exemption on the household income has been studied. The paper has a practical value for the standpoints presented in the paper are not restricted only to the explanations in the problematic areas but offer a practical solution as well. Practical problems are illustrated with explanatory drawings and examples, which make it possible to get a consistent overview of the principles handled. Opinions of recognised experts and researchers on VAT have been taken into account when compiling the paper. Legislative acts regulating the application of VAT or having an essential importance in its application have been looked into. In order to draw up the comparative and empirical analyses, data on the structure of household expenditures from Estonian Statistical Office, United Kingdom Government Statistical Service, Latvian State Statistical Bureau and the Lithuanian Department of Statistics were studied. In order to achieve the objectives set the following steps have been taken: 1. the theoretical basis of taxation in general and consumption taxes was studied; 2. the history of VAT and the reasons that influenced its application or its deferment were looked into; 3. the terminology used for VAT, as well as the practical problems of VAT levy were analysed; 4. the impact of a decrease in VAT reduction and an increase in the basic exemption on the well-being of households was analysed. There are three chapters on this paper Chapter I of the thesis gives an overview of taxation as a sign of an independent state and a part of general economic policy. The overview mostly draws upon taxational and legislative acts regulating taxation and standpoints of taxation experts and researchers. It also expands on the history of VAT imposition in two different economic regions –the United States of America and the European Union. It is analysed why VAT in the given region has been levied or its imposition has been postponed. Chapter II concentrates on the terminological analysis and on solving some practical problems concerning the VAT. Terminological analysis mostly elaborates on the necessity to rename the name of the VAT and Value-Added Tax Act valid in Estonia at present (käibemaks and käibemaksuseadus, respectively) pursuant to the taxation principles derived from the conception of added value. When studying the problems concerning VAT imposition the author of the present paper has paid attention to the bottlenecks encountered in practice. The paper also provides explanations to preclude causes of its origin in the future. In Chapter III the author has studied the effect of tax reduction on the household income. In course of the study a comparative analysis was carried out where the pecuniary savings derived from tax reduction formed a basis for the analysis. As an alternative, pegging basic exemption to the bottom rate of gross earnings and its impact on the household income was studied. The brief summary of the conclusions is as follows: History. The taxation of consumption was first paid attention to in Europe in the 16th century. A counsellor to the Spanish king, Duke Alba, had an idea to levy a tax on the local commodity exchanging. In addition to the price, an obligatory sum was to be imposed on all goods that the vendor would transfer to the state (e.g. tenth penny tax). But such suggestions caused a riot among the people and were never put in practice. At the beginning of the 20th century, in 1918, the United States discussed the possibility of consumption tax introduction, but consumption was first taxed only in 1930s. The introduction of a common VAT system in the European Union can be explained by a number of reasons, which include: the harmonisation of indirect taxes and the avoidance of the cumulative effect of progressive taxes, guaranteeing independent taxation both in national level and between the member states, the formation of a common basis which forms a basis for pooling capital for the common budget. An essential factor that would disfigure the administration of the budget of the EU by the member states is the destination-based taxation of consumption valid at present. Pursuant to this principle those member states whose import of goods surpasses export have a heavier burden in implementing the budget. Transition to the ’country-of-origin’ principle is very difficult because it would mean a substantial increase in the tax burden of exporting countries and smaller countries that import most of their commodities would lose an essential part of their present sales tax revenues. Harmonisation is still going on as a system for tax revenue payments satisfying all member states has not been worked out yet. Till then the relatively complicated and full of exceptions transitional provisions that are constantly being changed will be valid. The common value added tax imposed in the European Union as a consumption tax makes it possible for the member states to establish common rules, which might, in some cases, injure the interests of the member states. One of such example might be the imposition of common VAT from January 1, 2006. In the United States of America the most widespread consumption tax (in 45 states) is retail sales tax. The biggest industrial country in the world has not imposed VAT on the central governmental level. This can be explained by both political reasons and the federal system of government: • VAT imposed by the central government would restrict the member states in collecting sales tax • The levy of VAT may establish a new “money machine of the central government” that would make it possible for the central government to spend more money on governance and increase tax rates. Terminology and practical problems The term ‘turnover tax’ is misleading because turnover tax is a cumulative tax, whereas VAT is not a cumulative tax. The term should be harmonised with the principles of the tax. It is also necessary to harmonise the terminology applied in legislation with the actual content of the term. ‘Turnover’ tax should be renamed value added tax, in short VAT. Opposition to the change in the name of the tax is not justified. David Williams, a Professor at the London University, seeing the rapid development of the VAT suggested already in 1996 for the states imposing VAT that they should harmonise the term with the concept of the tax. When talking about taxation objects, the term ’turnover’ cannot be interpreted as an alienation transaction. In case of VAT ‘turnover’ can be interpreted as a result of an action or a deed. It can be the thing or the value that is taxed. The term ‘turnover’ in the form of a VAT differs from the revenue from sales applied in accounting. The objects of VAT are not transactions but the passing of a good in the process of transaction. Professor Williams acknowledges that naming the transaction VAT has caused several problems. In English the word «supply» is used. Its translation into Estonian, when bearing in mind VAT would be ‘tarne’ (supply, delivery) which quite often does not foresee passage of ownership or title. The moment of delivery marks the moment of handing over the goods. In sense of VAT the sale of basic assets and other irregular transactions that the accounting office handles as sundries may qualify as turnover.There are two foundations that determine the time for the formation of turnover and rendering a service: • dispatch of goods, providing a service • total or partial payment for the goods or services. Time for “intra-community supply” and “intra-community acquisition” differs from the principles mentioned above because intra-community supply and acquisition are considered being originated on the 15th of the month following the dispatch or arrival of the goods or services, or on the date the invoice was issued, if it the latter was performed earlier than the 15th. In this case there are two criteria for determining the time for turnover generation: • dispatch of goods • or issue of the invoice. In practice, the date on which the invoice was issued should form the basis for the determination of the intra-community turnover generation. The invoice should be issued within seven days from the dispatch of goods. Dispatch of goods and rendering them accessible will form a basis on the occasion only when the invoice has not been issued by the 15th of the following months. Tax levied on travelling service as a special arrangement is quite new in Estonia and the common methodology in some aspects is still being elaborated on. Special arrangements in the taxation of travelling services are imposed on the end-customers Following the principles of special arrangements the turnover of the travel agencies offering the service is only the add-on percentage or marginal of the price the travel agency has added to the goods or services when reselling to the traveller. The author of the present paper has explained the main principles in the introduction of the special arrangements and given guidelines and formulas devised by the author for the application of integrated computing methods. The impact of the VAT reduction on the household welfare In order to examine the impact of the VAT rate reduction for food and nonalcoholic beverages on the household income the author of the paper has carried out current analysis in two stages. In the first stage the author has examined which would be an alternative variant that would influence the most households in Estonia if amendments are made in income tax. In the 130 second stage the result of first stage is compared with the expected result of the VAT rate reduction for food and non-alcoholic beverages. The author of current paper is on opinion that the VAT rate reduction for food and non-alcoholic beverages in Estonia is not argumented when alternative variants are applied. The author finds that one of the possible alternatives could be binding the basic exemption in Estonia with the minimum gross wage established by Estonian government. In addition to the application of alternative variants there are other counterarguments to the reduction of VAT on foodstuffs: • the proportional expenditure on foodstuffs in the household consumption expenditures would decrease; • the consumption expenditures structure in the household would change and the relative importance of foodstuffs in the total consumption expenditures would decrease; • the VAT underpayment to the government budget brought about by a decrease in the VAT rate imposed on foodstuffs in the essential part would remain for the retail sales to cover. The reduction of VAT rate on foodstuffs could be considered when alternative variants cannot be applied. The topicality of the problem might increase when in connection with the introduction of the Sixth Council Directive of 17 May 1977 in the Member States the VAT rate in Estonia would increase. The author of the present paper is on an opinion that he has achieved the set objectives and solved the questions raised.