There are different types of rates in the tax system. They are used in combination to achieve the greatest efficiency. What are the types of tax rates that can be met today? What is the difference? How do they affect the tax burden that the population of the country feels? What is the tax rate from the macroeconomic point of view? What is their functional and leverage?
What is the tax rate?
First you need to define the terminology. So, the tax rate (the rate of taxation by taxes) is the amount of charges that go to one additional unit of change in the base. When it is expressed as a percentage of the taxpayer's income, it is called a quota. The rate is an obligatory element of the tax.
The tax burden
The tax burden is understood as the percentage level of the ratio of taxes to the country's gross domestic product. In other words, the ratio of all obligatory payments to the GDP of the state falls under this concept. The load can be calculated separately for each entity or as a whole for an object (enterprise or human wage). To calculate it, it is necessary to use the formula: SNCH / D, where SNF is the amount of accrued taxes, D - income.
For the underdeveloped countries, where there is no strong social security system, the low tax burden is characteristic, in the developed countries it is, on the contrary, very high. For the latter example of Sweden, where it in some years was more than 60%. It is also necessary to note within the article the difference between the actual and nominal loads. They are useful from the point of view that they allow to approximately estimate the degree of tax evasion. Thus, with increasing nominal load, the number of cases of avoiding payments increases. When it reaches a certain level, the phenomenon of evasion becomes massive, so the actual state of affairs changes toward decreasing the money received. When the state receives the largest amount of money, it is considered that the rate is at the Laffer point. But they try not to reach it. Now we turn to the main topic and consider the types of tax rates. The indirect system of collecting taxes will be considered only in general terms, and the main attention will be paid to the direct.
What are the types of tax rates?
So what variety does it have? At the moment, the following types of tax rates are used. Their list is easy to remember:
- Proportional.
- Regressive.
- Progressive.
Each of them has its own characteristics, which will now be considered. There is another type 4: a fixed rate. Its meaning lies in the fact that a certain amount of tax is set, which must be paid, regardless of income. But in the absence of its economic flexibility, now the fixed rate is not used on a national scale, but only in the form of a rent, for example, for a ton of oil or iron ore (regardless of profit).
Proportional tax rate
Under the action of such a mechanism, the same portion of all types of income is taken. To predict how it will affect the amount of money people receive, small calculations are made. So, from the net income should be deducted mandatory spending, which go to food, clothing, medical care, housing and transport. All that remains (provided that in general something will happen), will be discretionary profit. It can increase or fall after changing already existing rates (or introducing new ones). It should be noted that a proportional tax system is quite uncomfortable when applied to the poor. Thus, 500 rubles out of 10 thousand and 5,000 out of 100,000 have different values for the owners of these amounts, therefore in a number of compulsory payments the state uses other types of tax rates. A proportional system is used when working with a large business.
Regressive tax rate
A regressive tax rate is understood as such a procedure of obligations when, with the growth of the taxable base, the interest that must be paid from their incomes decreases. Example implementation: when fixed is not a certain part of the profits received, and a certain amount, which you need to pay. For convenience, all income is divided into separate parts. Each of them is subject to its own rate. Therefore, the reduction in the amount of payment is not for the entire income, but for its part. The regressive tax rate seems to many to be an unfair way of taxation, and in its pure form it is little used. There are more popular types of tax rates. Direct regression is one of the most popular in this category. A single social tax can be cited as a practical example of implementation. So, with increasing spending on wages, the tax rate is reduced. This mechanism was created for the withdrawal of wages from the shadow. By the way, about the types of tax rates. Direct regression takes an exceptional position here. As you can see, it is used to motivate certain actions and is used by states to improve the level of legality.
Progressive tax rate
Progressive taxation is based on income that is used at its own discretion. Of greatest interest is the difference between aggregate funds and spending on priority needs. This principle is the basis of the progressive tax rate. After all, with the quantitative growth of incomes, the total share of funds that go to normal human functioning (spending on food, housing and other priority payments) decreases. And at the same time, the amounts that go to buy luxury goods or pleasures are growing. This tax rate is the solution of cases when a less wealthy taxpayer experiences a stronger tax burden than a wealthy person. In addition, it is divided into subtypes, which differ from each other:
- Simple bitwise.
- Single stage.
- Relative bitwise.
- Multistage.
- Linear.
- Combined.
Bidding Options
However strange it may seem, the tax rate, besides the main purpose, performs a number of functions of the economic plan. Some of them:
- Saving the economy from "overheating". Under capitalism, there is such a negative phenomenon as periodic systemic crises, which bring down part of the country's economic sector. With the growth of the economy in conditions of low tax rates, the market saturates more. And when you reach the threshold of the crisis, you will have to fall "from a greater height." To avoid this, governments are pursuing a policy of increasing the tax burden, in order to reduce the speed and intensity of market saturation.
- Regulation of trade flows. The fact is that any infrastructure has limited opportunities for its use. And if the workload approaches the maximum, you can increase transport or transit taxes to indirectly affect this situation and additionally replenish the state budget.
The impact of the rate on the economy from the macroeconomic point of view
The state as a reason for establishing a tax can use anything from the redistribution of revenues to create equity and ending with the elimination of negative external economic effects. And in order to better conduct their policies and achieve maximum efficiency, the rate is used as a tool. It should be noted that, from the macroeconomic point of view, its reduction stimulates the growth of aggregate demand among citizens and simultaneously motivates entrepreneurs to increase the aggregate supply. This follows from this pattern: the fewer citizens need to pay taxes and the lower the rate for them, the more can be spent for consumption and the acquisition of new goods. Thus, a cycle of increasing activity in the economy is created, which, although not endless, can positively affect the shortest term for a period of several years. This principle is used by states when carrying out an enabling economic policy. With increasing tax rates, firms and businesses are forced to raise prices, lose market share and reduce their presence. Thus, the transition to a cycle of growth reduction is carried out. It can be seen that the reduction in the aggregate supply in the market is inversely proportional to the value of the tax rate. Such dependence was described in the works of the economic adviser to the US President Ronald Reagan Arthur Laffer, who became the founder of the theory of "supply economy".
Conclusion
Summarizing, we can say that at the moment there is no universal tax rate, which could be applied anywhere. Perhaps it will be developed in the future. Whatever it was, now we have only what is.