Methods of legal tax regulations

East Kazakhstan State University in honor of S. Amanzholov, Kazakhstan

The state realizes its taxation activity using certain methods. Taxation activity methods are means and techniques, with the help of which the state performs its functions in the sphere of taxation.

Taxation methods include not only promulgation of regulatory legal acts, which directly determine rights and duties of subjects and participants of tax relations, but also a range of other legal acts and legally significant activities.

Major legal methods of the state tax system regulation are given in Picture 1.

Let us briefly discuss characteristics of methods of legal tax system regulation in the Republic of Kazakhstan.

The first and the major method is promulgation of regulatory legal acts by authorized state bodies. By means of these acts the state establishes and enforces taxes, determines rights and obligations of subjects and participants of tax relations (taxpayers in the first place), defines legal responsibility for tax law infringement, forms the structure and determines the competence of its tax bodies. The totality of these acts represents tax legislation of the state. Tax Code uses the term “Tax and duties law” in this case.

Adoption of any regulatory legal act (including the law of the Republic of Kazakhstan), which concerns taxation, but is not provided for by the Tax Code, make this act invalid and consequently leading to no legal aftereffects.

Tax Code states that tax legislation is effective in the entire territory of the Republic of Kazakhstan and applies to all individuals and legal entities, and their structural departments (clause 1, art. 3, TC).

Giving characteristics to taxation regulation in the Republic of Kazakhstan at the Constitutional level, we can single out its following peculiar features.

Article 35 of the Constitution of the Republic of Kazakhstan says: “Payment of legally established taxes, fees and other obligatory payments shall be a duty and responsibility of everyone”.

In spite of its laconism the article has a very substantial meaning.

Picture 1 - Legal methods of tax system regulation in the Republic of Kazakhstan

First of all it provides for the duty to pay taxes by everyone which is the established principle of universality of taxation. Besides, we need to note that this article is located in part II of the Constitutions and has a title “Rights of the individual and citizen”. Consequently, th is duty to make payments applies only to individual tax payers.

Let us also mention that some authors interpret the article quite broadly saying that it applies not only to citizen tax payers, but also to officials of organizations-taxpayers, i.e. it applies to legal entities, too.

Everything said does not mean that legal entities are not obliged to pay taxes – the difference between them and individual tax payers lies in the fact that the obligation of citizens to pay taxes is of Constitutional character while the obligation to pay taxes by legal entities is determined by Tax Code.

In the second place, paying taxes is defined as an obligation for all citizens, which makes it different from any voluntary payments or dues paying which is a necessity resulted from signing agreements.

The second method of state tax system regulation is adoption of individual legal acts on taxation.

Individual legal regulatory acts are mostly applied when taxes are paid in compliance with tax notification or tax notice sent to a tax payer by taxation authorities. This method of tax payment is used in paying individual property tax, when taxation authorities calculate the tax sum and sends a tax payer the tax notification against which the taxpayer pays taxes.

Tax notification is a written message sent to a tax payer by a taxation body which states the obligation for a taxpayer to pay taxes.

This notification is characterized by all features of an individual legal act, i.e. it regulates certain tax law infringements, is addressed to a certain person, and is of single use. This act generates the obligation with the person to whom it is addressed, is obligatory and compulsory, which is characteristic of any legal acts.

The notification contains a full name or a full title of the taxpayer, taxpayer registration number, date of notification, tax obligation sum, tax obligation discharge requirement, grounds for notification, taxation order.

The notification must be handed to a taxpayer or the taxpayer’s representative, signed by them or there should be another way to confirm notification sending and receiving.

Tax notification as a form of individual legal act is used in quite varied cases and situations.

Thus, tax notification is used in those cases when calculation of a tax sum is made by a taxation agency. It is also used in calculation of tax sums, penalty fees and fine sums as a result of a tax audit, and also as a means to ensure an obligation discharge concerning outstanding tax obligation and compulsory collection of tax arrears.

Elimination of infringements revealed as a result of office control can also become the subject of tax notification. This notification can be connected or cannot be connected with payment by a taxpayer of a certain sum of money and contain, for example, the requirement to eliminate infringements of tax legislation.

Tax notification can be addressed not only to the taxpayer but also can be sent to a tax agent, and can used to convert the penalty to money on bank accounts of taxpayer’s debtors.

Tax Code determines the date for each tax notification fulfillment.

The third method of state tax system regulation is execution of bilateral tax legal acts.

The first place among such acts belongs to a tax agreement.

Currently the use by the constitution of a tax agreement is connected with the institute of the so called investment tax preferences.

Investment tax preferences are granted in corporate income tax and property tax.

The preference consists in granting to a taxpayer who invests means into creation of new enterprises or extension and renovation of the existing ones of a right to additional deduction from an aggregate annual income and also in granting such taxpayer with exemption from property taxes on fixed assets put into operation within the frame of an investment project (investment program).

The preference is given to a taxpayer in accordance with the contract signed by the authorized state agency which determines the date of the preference commencement.

Corporate income tax preferences give the taxpayer a right to deduction from the aggregate annual income of a cost of fixed assets put into operation with equals shares depending on the period of preference existence.

Property tax preference consists in granting exemption from paying tax on property put into operation within the frames of investment project (investment program) with fixed assets.

Preference effectiveness period is determined in each separate case depending on investment size and cost recovery but cannot exceed five years.

In the world international practice tax agreement and tax preferences it brings are usually referred to as “tax credit” or “investment tax credit”.

Both tax credit and investment tax credit are the means of changing the tax payment date or, to be more exact, shifting this date to a later period of time. Such change in tax payment date does not create a new tax obligation.

Characterizing tax legal agreement we should mention the following of its features:

- this agreement serves as a method of performing by the state of its tax activity;

- legal tax agreement is a method of regulation of social relations which according to their economic properties are of tax character;

- one of the parties in this tax legal agreement is an authorized state body, acting on behalf of the state and for the benefit of the state and the other party is the taxpayer;

- the parties in the tax legal agreement are not equal in their rights in civil-legal sense. This type of agreement is used for partial regulation (in addition to the imperative methods regulating this relation in general) which is of tax legal character, i.e. of state-authoritative character;

- tax legal agreement as any other type of agreement is based on agreement of the parties.

Tax legal agreement is a type of financial legal agreement and has its peculiar specific features determined by the peculiarities of material tax relations regulated with the help of this agreement. This agreement is treated according to the same criteria that are put forth to other types of agreements. To the civil legal regulations, in particular.

The forth method of regulation is the realization (by the authorized body) of the rights and obligations as the subject of a certain tax legal relationship.

The process of realization of the state tax activity gives rise to multiple tax legal relations (both material and organizational). The most interesting relations in this case are material tax legal relations since in accordance with them the state realizes its major taxation objective – receives money which is the sense and purpose of tax activity.

Though substantial tax legal relations are “authority-subject” relations (i.e. relations of legal inequality), nevertheless each subject of this relation has both rights and obligations. The state in this legal relationship is represented by the state body which has both rights and obligations both as a state representative and as the ingenious participant of this legal relation.

The major objective of a taxation agency as a state representative in substantial tax legal relation and as its ingenious participant is ensuring discharge of tax obligations by the taxpayer, i.e. securing complete and timely tax payment.

For these purposes the state authorizes this agency with legal power and provides for different legal mechanisms of collecting tax, and, at the same time, vests the othr party with certain responsibilities.

Thus, state bodies have the right to exercise tax control in the order prescribed by the Tax Code, check taxpayer’s pecuniary documents, account books, records, budgets, cash, securities, calculations, declarations and other documents related to tax obligations, demand from the taxpayer to provide documents concerning calculation and payment (withholding and transfer) of taxes, explanations concerning the way the documents are filled out, and also documents confirming correctness of calculation and timely payment of taxes, withdraw taxpayer’s documents testifying to any tax infringements, examine all objects used to generate revenue regardless of their location, make an inventory of taxpayer’s property (except taxpayer’s living premises), receive information from banks about taxpayer’s bank accounts and flow of funds, determine tax obligation of the taxpayer using indirect methods, bring a case before a court in accordance with the legislation of the Republic of Kazakhstan and so on.

This activity being a legally important unilateral activity of the authorized state agencies serves as a method of exercising by the state of its tax activity.

The fifth method of state tax system regulation is calling to legal account of individuals accused of tax law infringements.

The state can use different types of legal liability for tax law infringement. The two most frequently used type of legal liability are criminal and administrative ones, which are provided for by the Criminal Code and Administrative Infraction Code.

It is widely accepted that tax law infringements are divided into pecuniary and formal ones. According to some of the authors the major difference between them consists in the fact that pecuniary infringements result in damaging the state with uncollected or late payments and formal infringements have no sign of damage, it is enough to have formal breach of a certain tax law norm. The example of such tax law infringement is the refusal to provide documents by the request of a taxation body. Such refusal is considered tax law infringement no matter whether tax nonpayment took place or not.

Depending on the type of tax aw infringement there are currently two types of legal liability: criminal and administrative.

Bringing infringer of a tax law to account the state, as a rule, pursues two goals.

The first one is securing the discharge of tax obligations, the core of which is paying the tax. This is especially characteristic of the situation when the taxpayer fails to pay the tax, pays it in a smaller amount or fails to pay the tax before the due date. Bringing to account such taxpayer the state at the same time makes him perform the tax obligations in a proper manner.

The second objective of legal liability for tax law infringement is punishment of a taxpayer which serves as a means of disciplining and prevention of tax law breaches.

The measure of administrative legal liability as it is provided for by Article 16 of Administrative Infraction Code is the administrative fine.

Measures of conditional legal liability as it is provided for by Articles 221 and 222 of the Criminal Code are fines, public works, deprivation of a right to take certain positions and be involved in certain activity.

Thus, the topic of taxes, their legal securing and functioning is one of the most debated and urgent topics in our society. This is easy to explain: taxes are the concentration of interests of all social classes and individuals; taxes are the means of development of pecuniary basis for the contemporary state existence and functioning, and in socially oriented state taxes is the source of financing of social programs in which the society as a whole is interested.

REFERENCES

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