This article analyses special features of the simplified system of taxation, accounting and reporting of small businesses, and proposes areas of improvement by analyzing main advantages and disadvantages. Main perspectives of the development of small businesses in Ukraine are outlined in this article in the context of innovation in the simplified system of taxation, accounting and reporting with an opportunity of usage of foreign experience.
Keywords: small businesses, simplified system of taxation, accounting and reporting, unitary tax, tax system.
ПЕРСПЕКТИВИ РОЗВИТКУ СУБ’ЄКТІВ МАЛОГО БІЗНЕСУ В КОНТЕКСТІ НОВОВВЕДЕНЬ У СПРОЩЕНІЙ СИСТЕМІ ОПОДАТКУВАННЯ, ОБЛІКУ ТА ЗВІТНОСТІ
У статті проаналізовано особливості функціонування спрощеної системи оподаткування, обліку та звітності суб’єктів малого бізнесу, а також на основі аналізу основних переваг та недоліків запропоновано напрями її вдосконалення. Окреслено перспективи розвитку суб’єктів малого бізнесу України в контексті нововведень у спрощеній системі оподаткування, обліку та звітності й можливості використання досвіду зарубіжних країн.
Ключові слова: суб’єкти малого бізнесу, спрощена система оподаткування, обліку та звітності, єдиний податок, податкова система.
ПЕРСПЕКТИВЫ РАЗВИТИЯ СУБЪЕКТОВ МАЛОГО БИЗНЕСА В КОНТЕКСТЕ НОВОВВЕДЕНИЙ В УПРОЩЕННОЙ СИСТЕМЕ НАЛОГООБЛОЖЕНИЯ, УЧЕТА И ОТЧЕТНОСТИ
В статье проанализированы особенности функционирования упрощенной системы налогообложения, учета и отчетности субъектов малого бизнеса, а также на основе анализа основных преимуществ и недостатков предложены направления ее совершенствования. Определены перспективы развития субъектов малого бизнеса Украины в контексте нововведений в упрощенной системе налогообложения, учета и отчетности и возможности использования опыта зарубежных стран.
Ключевые слова: субъекты малого бизнеса, упрощенная система налогообложения, учета и отчетности, единый налог, налоговая система.
Problem statement. Modern development of Ukrainian national economy depends on small businesses, which take a leading place in it. They help to create a big number of work places and to produce products. Effective reforms help to provide a stable economic system that depends on improving the tax system. If the country wants to have a stable economic situation, it will have to set the level of tax burden. Today tax system can be described as an increasing number of enterprises which leave their income unnoticed. This step reduces revenues of the State budget and has negative impact on the development of the state economy.
The issue of improving the simplified system of taxation, accounting and reporting of small businesses is very important. The main areas of reforming are based on strengths and weaknesses of the system that helps to provide enterprises with an opportunity to be competitive on national market.
Analysis of the latest studies. Main directions of improvement of the simplified system of taxation, accounting and reporting were studied by O. Chepets and M. Fursin. The great attention is paid to this topic by such scholars as A Krysovatoho, V. A. Valihura, I. V. Mariner, V. I. Onshynka, I. Churkin. In works of G. M. Biletskaya, M. V. Karmality, M. O. Kutz we can study the harmonization of Ukrainian tax legislation. Main strengths and weaknesses of the simplified system of taxation, accounting and reporting are outlined in the scientific works of M. Kmit, M. B. Sydymyra.
However, most of the materials are outdated the real state of the economy and are not taken into account, due to the changes in the Tax Code of Ukraine. That is why there is a need of finding new ways for improvement.
Objectives of the study. The aim of the study is to determine prospects of the development of small businesses in Ukraine in the context of innovation in the simplified system of taxation, accounting and reporting and the opportunity of using the experience of foreign countries by studying the theoretical and practical aspects of the chosen subject.
Presentation of the main material of the study. The introduction of the simplified system of taxation, accounting and reporting in Ukraine was launched with the purpose to withdraw small business out of the “shadow” and to overcome crisis tendencies in the economy. The installation of this system was the first step that gave a push to the legalization of small businesses by obtaining a small amount of state tax.
According to clause 7 of article 55 of the Commercial Code of Ukraine, small business is a company in which the average number of employees for the accounting year is not more than 50 people, and annual income from any activity does not exceed the equivalent of 10 million euro determined by the average annual rate of the National bank of Ukraine .
There are 93% of small businesses which are engaged in economic activity at the present stage in the development of national economy of Ukraine. This leads to the need of improving the current legislation in order to create suitable conditions of small business activities.
The development of a simplified system of taxation, accounting and reporting of small business was started in 1998 under the Decree of the President of Ukraine “On the simplified taxation systems accounting of small business entities” . This Decree contains the definition and the introduction to the single tax book of income and expenses that is required from small businesses.
The preparation and the submission of the simplified form of reporting of small business is governed by the Regulations (standard) accounting 25 “Financial Reporting of a small business” . According to this Regulation, the simplified form of accounting involves the application of double entry and the preparation of simplified reporting forms 1-m “Balance” and 2-m “Report about financial results”.
The fixation of the simplified form of taxation, accounting and reporting, tax groups, tax rates, characteristics of forms of accounting and reporting for each tax group is displayed in a separate section of the Tax Code of Ukraine, adopted in 2010, namely Section XIV «Special tax regimes”. However, changes about a special tax regime took effect a year later, and in 2011, business entities were governed by transitional provisions of the Code.
The improvement of the simplified system of taxation, accounting and reporting has a great role at the current stage of development of Ukraine’s tax system. However, these changes have negative effect on small businesses, accompanied by significant fiscal pressure to withdraw subjects out of the “shadow” (transparent accounting).
The current tax system of Ukraine with the last changes from the 1-st January 2016 identifies four groups of single taxpayer:
- The first group − individual entrepreneurs that do not use the work of employees, sell only goods from trading places in the markets and/or conduct economic activities to provide consumer services and the amount of revenue during the year does not exceed 300000 UAN.;
- The second group − individual entrepreneurs which are engaged in economic activities to provide services, including residential, single tax payers and/or population, production and /or selling of goods, activity in the restaurant industry, provided during the calendar year meet together with the following criteria: don’t use hired persons or persons who are employed; the amount of income does not exceed 1500000 UAN.;
- The third group − private entrepreneurs that use hired persons or persons who are with them in labor relations and the calendar year volume of income does not exceed 50000000 UAN.;
- The fourth group − agricultural producers, whose share of agricultural commodity production for the previous tax (reporting) year is equal or exceed 75% .
For single taxpayers of the first and the second groups the fixed rate is the minimum wage that is established by law on January 1 of the tax year, and for the third group in the percentage of income (interest rates).
According to the Tax Code of Ukraine the single tax rate for the third group of taxpayers is determined as: 3% of income if the entity is a VAT payer; 5% of income if the entity is not a VAT payer .
The accountants of the simplified system during accounting work use the accounts work plan for small businesses, which consists of 25 accounts that can associate with multiple accounts of common plan .
Using the simplified system of taxation, accounting and reporting has several advantages for small businesses, but there are significant drawbacks too. The main drawbacks of the simplified system of taxation, accounting and reporting can approach this system to general. There is a need to think about the benefits and the drawbacks between the simplified and the general system before using the simplified system (Table 1) .
The main benefits and drawbacks of the simplified system of taxation, accounting and reporting
|1) the simplified procedure of registration of a taxpayer;||1) the limited amount of revenue, which is allowed by the system;|
|2) the simplified calculations;||
2) no consideration for the payment of income for individuals for the reporting period.
|3) the same form of reporting;|
|4) the tax payment period for the subjects of the first and second groups is the calendar year and for the subjects of the third and fourth groups is a calendar quarter;|
|5) the accounting with a simplified form;|
|6) the opportunity not to pay a number of taxes.|
Source: Author built it on the basis of 
The current state of the simplified system of taxation, accounting and reporting in Ukraine is characterized by significant changes due to innovations. However, despite the significant benefits this system requires further research to address the shortcomings that hinder the process of attracting new business entities and not to contribute to the removal of a significant amount out of “shadow”.
In our opinion, after analyzing all the shortcomings of the system of taxation, accounting and reporting the main way to achieve a certain balance between the public interest and the business is to implement a set of measures:
- to increase marginal revenues from sales of products, goods and services;
- to make single tax-payer responsible for using its activities the employees without employment contract;
- to establish a program of preferential crediting of small businesses;
- to establish counseling centers .
That is why, in the direction of the tax reform in 2016 are planned significant changes of simplified system of taxaction, accounting and reporting. The major changes will include the unification of rates of single social tax to 20%, in contrast to the current system by 1 January 2016 – 34, 7%.
The basic rules for two groups of taxpayers are not changed, but there is prohibition of usage of the simplified system in hotels, restaurants management and selling of fur and leather in 2016.
For taxpayers of third groups the planning reduction in turnover of 4 times and a gradual increasing in tax rates: for VAT payers – 3%, and for non-payers – 6%. Also the unlimited number of employees and a turnover is reduced to 5 mln. UAH.
There is a limit for tax-payers of the fourth group on annual turnover and the number of agricultural lands that are in usage. The number of employees for individuals and legal entities is unlimited for agricultural commodity. The turnover will amount to 100 mln. UAH and the land area increases to three thousand, and the tax rate in proportion to the area and deliver lands .
After all analyzed above, it should be noted that innovations of the tax system in 2016 is compared to 2015 year for tax-payers of the first and second groups hasn’t changed. But new changes for the third group of tax-payer are gradually assimilated the simplified system of taxation to the general system.
Although the significant innovations greatly simplify this taxation system, but one of the most important steps was to use the international experience of the simplified system which is characterized by the single harmonization standard of accounting and reporting.
If you look through the international practice of the simplified system of taxation, accounting and reporting you will understand that there is no single definition for small and medium enterprises. The main criteria is the number of employees and gross sales.
The simplified tax system isn’t founded only in developed countries but in developing countries. However, this system has differences in scope and application of the criteria that are clearly defined for small businesses.
The international practice doesn’t have standard principles and the way of developing and using a simplified system.
However, there are four approaches of defining a simplified taxation system, including the system based on gross sales, the system based on indicative figures, the system of agreements between taxpayers and tax authorities, the patents .
The simplified system of taxation which is based on gross sales is the most common one and is characterized by such alternative methods of application as differentiation of tax rates for the same tax base, differentiation rates that depend on the gross turnover and a flat rate of turnover tax for all small businesses that use simplified system. This system is used in Albania and Brazil.
The main alternative of simplified system that is based on gross turnover is a system that is based on external indicators. A key role in the development of the system pays the actual income of a taxpayer. Effective indicators must meet the following criteria: be easily accounted and checked; have a low risk of falsification; must show sufficient and stable dependence on the actual income.
The main characteristic of the patent is using a single tax on business segment that doesn’t depend on the size or the gross turnover of the small individual businesses. In practice, the patent application is simple. For example, the taxation of traders, artisans and other low-income activities in Kosovo who pay quarterly 37,50 Euro.
The main target of patenting isn’t only getting tax revenues, but to improve the overall tax culture .
The simplified system is based on agreement between the taxpayer and the tax authorities that is the fourth form of simplified taxation. For example, the method «Forfait», which was used in France, but it was quickly repealed and replaced by the simplified system that is based on turnover. The system «Forfait» involves collecting large amounts of data and assessment of expected company profits by tax authorities.
This system is largely similar to the «Forfait» is still used in Syria. Small businesses during choosing this or that system are governed by the purpose of their activity and by the main priorities of the system.
Conclusion. Today there are many problems in the simplified system of taxation, accounting and reporting. Therefore, the improving of current tax system must take the interests of small businesses that are sensitive to innovations, namely the taxpayers of the first and second groups.
There is a need to develop gradual transition to the general taxation system for the third and fourth groups of taxpayers. The main directions of reforming current system of simplified taxation, accounting and reporting according to national experience could be: to increase marginal revenues from sales of products, goods and services; to make a single taxpayer responsible for using the employees without employment contract in their activities; to establish the program of preferential crediting of small business; to establish counseling centers.
However, it is necessary to use international experience that is characterized by the introduction of the simplification and the harmonization of accounting for small businesses through the development of the single accounting and reporting standard that will eliminate contradictions of existing regulations. One should also take into account the international approaches to the simplified system, namely: the system based on gross sales; the system based on indicative figures; the system of agreements between taxpayers and tax authorities; the patents.
The study and implementation under the terms of the domestic economy may also be one of the promising areas of reforming a simplified system of taxation, accounting and reporting for small business in Ukraine.
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