Indian Journal of Science and Technology

Abstract

Objectives: The paper substantiates the need in the improvement of the taxation of companies as a factor of economic development of the country and its regions. The aim of the research is the formation of corporate taxation mechanism that provides the maximum effect on the extension of the income base and increases in the companies’ solvency. Methods: In order to accomplish this aim the author’s used methods of theoretical and empirical studies and the system approach to the consideration of corporate taxation. The latter aided to determine the economic expediency of existing taxation system. The method of economic modeling was used for the presentation of research results.The methodology of determining the influence of the changing total tax rate and the model that includes the mutual dependence of the tax level and the taxpayer’s solvency. Findings: Apart from existing approaches to determination of the mutual dependence between the amounts of tax and discretionary income of a taxpayer, the proposed method views the dependence of the solvency on the amount of payable tax from the point of basic tax level and the changes in the total tax rate. It allows defining the actual tax burden of the taxpayers. Application: The significance of the study is the fact that the authors have revealed the role of tax in financial and distributional relationships. This fact is significant for the taxation theory because the known functions of tax mentioned in economic literature do not fully uncover the categorical nature a tax. 

Keywords: Discretionary Income, Income, Solvency, Taxation, Tax Rate, Tax Burden