What is indirect tax?
Indirect taxes are mandatory payments that are levied on profits on certain goods and services. Their main feature is that this amount is initially included in the final price. Therefore, when buying a product or service, part of the money is sent by the seller to the state treasury.
Note! Additional taxes bring much more income to the country's budget compared to direct taxes. Therefore, they are an integral part of the country's economy.
Other features of the surcharge:
- efficiency of transfer of funds to the state budget;
- increased profitability for the state, since the bulk of goods and services in the Russian Federation are subject to indirect tax;
- simple and clear calculation based on a couple of formulas;
- closed type of deduction;
- The seller is considered an intermediate link between the consumer and the state, that is, when transferring money to the treasury, an intermediary acts.
general characteristics
The key grouping of tax obligations implies the division of all budget payments into two large groups: direct and indirect taxes, a list of which is given below. Let's understand the key concepts.
Thus, direct liabilities should include all payments that are levied directly from the taxpayer’s property assets or from the income he receives. In other words, the taxpayer independently calculates and pays tranches to the budget. Moreover, transfers are made at the expense of the property owner’s own funds or income. Examples of such non-commercial organizations can be: personal income tax, non-commercial tax liability, obligations for property, transport, land plots and other assets.
Indirect taxes include a liability that is not calculated directly against the tax base, but is included in the cost of goods, work, or services sold or purchased. In simple words, the seller, when determining the final selling price of the goods, lays down a certain tax liability tariff. Consequently, indirect taxes are levied on the buyer when making payments for the purchased goods. It is the buyer who pays the additional tariff included in the price. After which this tariff, paid by the buyer, is transferred by the seller of goods to the budget.
In other words, the key difference is the nature of the withdrawal. That is, direct fees are applied specifically to the property or income-generating assets of the taxpayer. And indirect ones are calculated as a certain allowance. In most cases, the premium is set on the cost of the assets or services being sold. However, fixed payments can also be classified as CN, which are determined regardless of the tax base.
Pros and cons of indirect taxes
The advantages of indirect taxes include:
- speed of transfer to the state budget;
- stability;
- there is no need for increased control over revenues to the state budget;
- increases state income, improves the level of the country's economy;
- are not forced; consumers are not required to save money to pay indirect taxes;
- hidden nature - buyers may not be aware that they are paying a fee, which is very good from a psychological point of view.
As for the disadvantages, these are:
- have fiscal significance;
- can reduce the income of entrepreneurs.
What is the difference with direct tax?
| Criterion | Direct tax | Indirect tax |
| Who is the taxpayer? | Phys. or legal face | A buyer who purchases products from an individual. or legal faces |
| How does money flow into the state budget? | Paid directly to the government | Through an intermediary - the owner of an organization engaged in the sale of goods and services |
| What is taxed? | Everything the taxpayer has, income | Products sold, services |
| What determines the amount of tax? | Income received from any type of business activity | Price for goods, services, tariff rates |
| How do they depend on financial activities? | Directly | Do not depend |
| How is the calculation carried out? | Complex, includes several categories | Simple - special formulas are used |
| Is price formation involved in calculations? | Price depends on specific production | Affects an increase in the cost of services and goods provided |
| Degree of openness | Open payments | Closed payments, often consumers do not even know what part of the paid amount goes to the treasury |
Calculation methods
GDP = sum of value added.
Firm's value added = firm's income - intermediate cost of producing a good or service
Total value added = total level of output - total value of intermediate products[2]
The volume of GDP is currently calculated in accordance with the recommendations of neoclassical theory - as the sum of added value created in the country, assuming that it is created both in the production and service sectors. In this case, added value is assessed as the difference between enterprise income and material costs and does not include indirect taxes paid on products (services).
Calculation of national product
production method
Determining GDP and NI by summing value added (with additional adjustments caused by the transition from basic prices to end-user prices (end use, final consumption, market prices)) is called the production method.
The general scheme is: GDP = Gross Value Added Taxes on products and imports Subsidies on products and imports.
National income = GDP Consumption of fixed assets (depreciation) Balance of primary income receipts from abroad.
• goods and services supplied to units other than their producers;
• goods produced for own final consumption, namely services for living in one's own home and domestic services provided by paid domestic servants.
The modern industry classification used in Russian statistics, in particular for macroeconomic calculations, although close to international standards, is a modernization of the pre-reform All-Union Classifier of Sectors of the National Economy (OKONKH).
The ratio of direct and indirect taxes
The following systems of correlation between direct and indirect taxes in world practice at the moment are distinguished:
- Anglo-Saxon. The bulk are direct taxes, indirect taxes are a small part.
- Eurocontinental. High volume of deductions for insurance and social services. development. The main payments are indirect taxes.
- Latin American. The system is based on additional taxes paid to the budget. An increase in prices contributes to an increase in deductions. This type of ratio is effective in unstable economic situations and helps prevent a government financial crisis.
- Mixed. The goal of this system is to increase direct deductions, but not at the expense of income taxes, but on revenues from business activities.
Interesting! As for the Russian Federation, the Latin American system with elements of the Eurocontinental model predominates in it. The share of fees from business activities accounts for approximately 70%. This is not very profitable for entrepreneurs, but it is not possible to transfer part of it to consumers due to low purchasing power.
Types of direct taxes
Direct taxes can be divided into 2 groups – taxes on income and property. These mandatory payments are paid by the taxpayer himself - the recipient of the income or the owner of the property. From the point of view of classical theory, the main difference between direct taxes and indirect taxes is the inability to redistribute the tax burden to other economic entities.
However, not for all payments this difference between direct and indirect taxes corresponds to traditional ideas
Income taxes include personal income tax and corporate income tax. These payments are indeed practically impossible to shift to other persons.
As for the “property” group of direct taxes, the situation here is somewhat different. The owner of a property, land or vehicle can rent it out. Thus, the costs of taxes on the ownership of these objects will actually be borne not by the owner of the property, but by the tenant.
Consequently, this group of direct taxes to a certain extent has the properties of indirect taxes.
Types of indirect taxes
Today in Russia there are the following types of indirect taxation:
- VAT;
- excise tax;
- customs duties;
- government fees.
VAT
Value added tax is the most common type of indirect tax in the Russian Federation. This obligation is established for almost all types of goods and services. In addition, it is included in the cost of goods imported from abroad.
Note! According to statistics, VAT accounts for up to 40% of revenues to the state treasury.
Depending on how many stages the product goes through before reaching the final consumer, VAT will be charged so many times. For example, IP Ivanov, the owner of a wholesale vegetable warehouse, purchases vegetables from the vegetable warehouse of IP Sidorov. Then Ivanov resells the products to a small retail store of IP Petrov, where they reach the final buyer. In this case, each business entity is required to pay VAT, the amount of which has already been added to the price. Each participant in this chain sells goods at a certain markup.
Important! The current VAT rate is 20%.
Excise taxes
The excise tax applies to a limited category of goods:
- gasoline, diesel fuel;
- natural gas;
- alcohol;
- tobacco products;
- ethanol;
- cars;
- motorcycles.
Fact! In Russia, there is currently no fixed amount of excise tax. It is installed individually for each type of product.
Customs duties
This type of indirect taxation applies to entrepreneurs and enterprises that specialize in importing goods into Russia from abroad. Customs duties do not have a uniform rate. It depends on the terms of international agreements of other countries with Russia.
It is important to know! When importing an imported product, the entrepreneur must file a tax return within 15 days after the goods were transported across the border.
State fees
State duty is withheld from payment of legal services provided by government agencies. They are charged only at the moment when the consumer needs to use any services, for example:
- registration of a passport/international passport;
- marriage registration;
- order to register the car with the traffic police.
Financial burden with indirect tax: example
Trading-Consulting LLC carries out wholesale supplies of apples at a price of 70 rubles per 1 kg. Vending-Lending LLC buys them including 18% VAT, that is, paying 82.6 rubles per 1 kg for apples.
Then Vending-Lending LLC sells apples at retail at a price of 94.4 rubles per kilogram. At the same time, the selling price includes: the cost of apples - 80 rubles per 1 kg and 18% VAT in the amount of 14.4 rubles.
VAT received from buyers is 14.4 rubles for each kilogram of apples, Vending-Lending LLC must pay to the state. At the same time, the company has the right to reduce VAT by the amount that was included in the price of apples from Trading-Consulting LLC - that is, by 12.6 rubles.
It turns out that in its “pure” form, Vending-Lending LLC owes the state VAT on each kilogram of apples in the amount of 1.80 rubles (we subtract 12.6 from 14.4).
But the company’s own tax burden for VAT is zero. The actual cash receipt - 94.4 rubles per 1 kg of apples - exceeds the actual cash expenditure - 84.4 rubles (82.6 rubles per 1 kg of apples + net VAT payable in the amount of 1.80 rubles) by exactly 10 rubles. That is, this is how much the company would have earned if it had not paid VAT (and if its supplier had not paid) - buying apples for 70 rubles and selling them for 80 rubles per 1 kg.
Thus, the subject pays VAT indirectly - fulfilling the obligations of calculating it and transferring it to the budget, but without bearing a real financial burden.
Having considered examples of direct and indirect taxes, we will familiarize ourselves in more detail with the list of budget payments established by Russian legislation and try to determine what type of taxes they can legally be classified as. For convenience, we display the information in a table.
Goods on which indirect tax is not paid
According to Article 149 of the Tax Code of the Russian Federation, indirect taxes are not imposed on:
- medical group goods, services for medical care of incapacitated persons;
- provision of rented premises by foreign organizations;
- services of state kindergartens;
- urban passenger transportation;
- funeral services.
Indirect taxes make up a significant part of the Russian budget. At the same time, the majority of payers do not even take into account that almost every day they replenish the state treasury. Therefore, indirect taxation is invisible to the buyer, but makes a great contribution to the development of the country's economy.
