Text 4. What are taxes?

Taxes are a compulsory financial contribution by a person or body of persons towards the expenditure of a public authority. In modern economies taxes are the most important source of government revenues. Taxes on income (i.e. on wages, salaries, profits, dividends, rent and interest) and on capital are known as ‘direct’ taxes. Taxes on commodities or services are known as ‘indirect’ taxes.

Taxes are considered to have three functions:

1) fiscal or budgetary, to cover government expenditures;

2) economic, to give effect to economic policy, to promote stable economic growth;

3) social, to increase the economic welfare of the community.

In the USA nearly all of the federal government’s revenues come from taxes. By far the most important source of tax revenue is the personal income tax. Gross receipts from corporate income taxes yield a far smaller percentage of total federal receipts. Individual states levy their own taxes. As a result, the profits of a corporation are liable to federal and sometimes state corporate income taxes. This often imposes a double tax burden. When the after-tax income is paid out to stockholders as dividends, it is then taxed again as personal income.

In the UK there is no single code of tax law, the body of tax legislation being increased by each year’s Finance Act. The United Kingdom operates a ‘schedular’ system, whereby taxable income from different sources is calculated and taxed under the rules of a particular ‘schedule’.

Under Russian law, all Russian legal entities are subject to the profit tax law. Foreign entities that have a taxable permanent establishment in Russia are also taxed under this law.

Russian taxes provide revenue for three tiers of the budget: federal, regional and local. The major taxes paid to the budget are: profit tax, value-added tax (VAT), securities tax, withholding tax.

The Russian government tries to create a climate in which business can thrive, to keep the tax burden as low as possible. It also attempts to eliminate tax allowances, which deprive the budget of tax revenues, and to improve tax collection.

A number of countries have problems because of significant taxpayer non-compliance. Along with cases of illegal evasion of tax obligations there are entirely legal ways of avoidance by which a person may so arrange his affairs as to minimize, or even eliminate, tax liability on his property and income.

Russian tax system has undergone significant changes over the last few years: the Tax Code has been worked out and a number or related laws have been adopted. Yet the system is criticized and businessmen consider it complicated and unfair. The government is working to improve tax administration to close the loopholes for tax evasion.

Task 1. Find English equivalents for:

Налогообложение; подоходный налог; прямые и косвенные налоги; благосостояние общества; облагать налогом; налоговое бремя; налог на корпоративный доход; доход после налогообложения; система «шедул»; налог на добавочную стоимость; налог на ценные бумаги; налог с суммы дивидендов; налог на прибыль; отменить налоговые льготы; обязательства по уплате налогов; уклонение от налогов; налоговое администрирование; лазейки.