Peculiarities of Tax Systems of Developed Countries

Besik Jobava Full Professor of the University of International Relations of Georgia, Dr of Economic Sciences

Under the conditions of modern market economics, it’s widely acknowledged, that there is no absolutely free economics and in any country, the economics is bearing the mixed character, from this point of view, self-regulation and state regulation are acting parallel in it.

For today, the important mechanism is the tax politics, by means of which, the state makes its influence on Market Relations. Just by means of State Politics (reasonable manipulation of tax, enforcing of direct allowances) the State makes its influence on savings, economic increasing, material solvency and the others. For instance in USA, for the purpose of making the jobs for teenagers during the summer vocation, the State fixes the Tax allowances. In many developed country, tax allowances are valid for the Companies, which will place their enterprise in the Regions with high level of unemployment.
Under the Tax System of developed countries, there are reviewed the taxes fixed by the Legislative and the bodies of Authority of the country, their forms and methods of payment. From its party, the Tax system is uniting the Tax bodies, legal documents regulating the State relations, taxes, duties, and the taxes to be taken out in the budget in face of State fee.
The Tax System includes the unity of elements, which are presented as follows:
a) The subject to be taxed by tax i.e. Tax Payer.
b) The object of taxing: income, profit, on the basis of which, the calculation of tax is made.
c) The rate of tax, the volume of tax presented on the unit by the object of tax.
d) Tax allowances, exemption from tax, fixing of penalties, fines and the other sanctions because of failure in payment.
e) Tax control i.e. Tax Administration, which includes the rules and forms of taking out the tax.
The Tax System is a theoretical and methodological base of tax politics of any country, the alteration of which depends on economic condition created in the country; volume of internal and external debts of the State. The Prof. I. Meskhi and O. Nikoleishvili allocate the following among the main principles of tax system:
– Any Tax Payer is obliged to pay the tax fixed by her Law.
– Fixing the taxes, which are breaching the entire economic space of the country is inadmissible.
– The tax must be stable, tax rates and tariffs must be fixed for a long period of time.
– The methods for calculating the tax must be as simple as possible.
– Fixing of parallel (doubled) tax is inadmissible.
– The rates of tax must be proportional with the benefit, the State is able to give to Tax Payer.
– The rule of fixing and taking out of tax must be united nevertheless of geographical location of tax bases form of property, sorts of economic activity and the sources of income.
– Justice must be followed as much as possible upon the distribution of tax charge in vertical and horizontal section.
The principles of Tax System are acceptable for developed countries, and the developing countries are attempting to approach these principles as much as possible. There are used three sorts of rules of taking out the tax in developed countries:
a) Cadastre
b) Paying the tax before setting the income
c) Paying the tax after setting the income
The cadastre code is based on using the cadastre and registry, in which the list of typical object is reflected according to outside signs. There is an entrepreneur public and the other Registry. Paying of tax before getting the income in the enterprise is made upon calculation and remittance of income tax for the workers and after getting the income, paying of tax takes place proportional to incomes shown on the basis of presented declaration.
In developed countries, the taxes, according to the criteria of taking out are divided into the direct and indirect taxes. The direct taxes are taken out from the incomes and property of payer and the indirect tax is taken out from the goods and Service.
In developed countries, in the limits of tax system, the budget incomes from the central territorial units are merged off, referring it, in the united states (USA, Germany, Canada), three levels of the budget is functioning: Federal, Regional and Local. The developed countries, differ from one another for the certain point of view by the functioning of tax system. for instance, in Great Britain, the tax reform is taking place under the moto: “Low taxes create efficient economics”. In the USA, tax reform was carried such into two stages in 1981 and 1986. The reform of tax system in Germany was began by the following principle: “Law rates and few allowance are better”. All the mentioned above show clearly, that the changing of tax system in developed countries is bearing the targeted in advance and successive character.
From the point of view of tax system, the tax system of Great Britain is too worthwhile to be paid an attention the main tax of which is an income tax, which is paid by the whole population of Great Britain. calculation of the income of individuals is based on the incomes of individuals, which is divided into six parts : a) Income from the property of land and premises. b) incomes from forest massive used for commercial aim, c) incomes from the state securities, d) incomes from entrepreneur and commercial activity, e) salaries and the others. f) the incomes and dividends distributed by company.
From indirect taxes, the leading place is occupied by Value added Tax, 17% of the incomes of country budget is at its share, income tax for little business ranges in the limits from 10 % until 20% the different attitude is in defining the criteria of little business, namely, the enterprises, the profit gained by which within the year doesn’t exceed 250 thousand Pound Sterling belong to little enterprises.
In the incomes of Federal budget of USA, the income tax of individual for the great of share is presented for 44% and the taxes in the foundations of social insurance for 34% are on the second place.
For the purpose of calculation of income tax of individuals, all kind of incomes salary, income from entrepreneur activity, aids, and pensions and aids issued by insurance foundations, incomes from securities and the others, gained by him(her) within one calendar year are summed up.
There exist tax rate of three annual income to be taxed (15, 28 and 33) annual income until 29 750 USD is taxed by rate for 15%, from 29751 until 71900 USD – by 28%, from 71501 USD until 149250USD – by the taxation of above and the taxation of annual income up to 149251 USD is reduced until 28%.
The income tax of states is a subject of interest, which is paid by residents of the state and the individuals who get the incomes on the territory of the state. For instance, the individuals, who work, but don’t live in Washington, pay the tax on the income gained from the salary, but the others pay the tax from the income according to their residence place.
The local taxes are into the force in the USA, which are the main source of the part of income of the local budget, for instance, the city of Washington covers 84% of the expenses with its incomes and the rest 16% are covered in face of Federal subsidy.
The positive moment for the tax system of USA is a support of development of little business. namely, for the companies busy with little business the volume of sale of which doesn’t exceed 200 thousand USD per year, the allowances are fixed upon calculation of income tax. in relation with USD it could be noted, that the difference among the taxes of different states is very great. by means of taxes, the Government puts the problem of accommodation in order, for instance, in big cities the taxes are very high, in poor adjustment states – they are lower (Massachusetts, Vermont)
From the tax systems of developed countries the tax system of France is too much worthwhile to be paid an attention. in France, from the central taxes the followings are of a great importance: tax of joint – stock companies, Value Added Tax, and the income tax Value Added Tax is main indirect tax, which is giving 44,1% to the budget of France. four rates of VAT are into the force in France for today, high 22% rate, which is used for the taxation of automobiles, alcohol drinks, tobacco products, cosmetics, the certain article, of luxury and the other valuable things. the low 7% rate, which is fixed for the books, journals and newspapers and the lowest 5,5% – which is used for the goods of urgent usage and service. for today, the standard rate of VAT in France is 18,6%. Medicine and education, activity of state institutions, targeted to carrying out of educational, cultural, administrative, social and sports functions are exempted from paying the VAT.
From the local taxes, four main taxes are marked out in tax system of France. Tax of the land of non-agriculture designation, tax of the owners of premises, professional tax, which is drawn up by the local bodies upon the formation of the project of budget, but in France, the rate of local taxes can’t exceed the maximum permitted by the law.
As a result of tax reform implemented in developed countries, two tendencies where revealed in the world. One group of the states ( USA, Canada, Japan),made its accent on increasing the importance of indirect tax.
For today, one of the difficult problem on the world is the setting of “Golden Mean” of optimal equality between the functions of fiscal regulation. it’s true and genuine fact, that reducing the tax rate support the economic increasing in the country, but one of the main problem is a providing with tax incomes.
For today, the Georgian Tax System doesn’t meet with all the principles of tax system of the countries having a developed market economics, but the Government of the country is doing its best to approach the tax system with advances European analogues under the conditions of transitive economics and adjust it into the harmony with the tax system of developed Western countries.

e-mail: besikjobava@yahoo.com