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Reform of VAT and taxation in the construction industry

Vol. 25, Iss. 2, FEBRUARY 2019

Received: 26 November 2018

Received in revised form: 12 December 2018

Accepted: 26 December 2018

Available online: 28 February 2019

Subject Heading: FISCAL SYSTEM

JEL Classification: H21, H25, H26, H30

Pages: 458–479

Davletshin T.G. OOO Burovye i Neftepromyslovye Nasosy (Oil-rig and oilfield pumps), Kazan, Republic of Tatarstan, Russian Federation

ORCID id: not available

Subject The article considers specifics of construction enterprise taxation, the tax burden and financial results depending on tax regimes and cost structure, the impact of imperfect tax laws on financial performance.
Objectives The focus is on efficient tax system creation that promotes economic growth and budget revenue increase.
Methods The study draws on general scientific approaches and methods.
Results The paper investigates flaws in laws on VAT as the main reasons for applying shadow financial schemes by organizations of the building complex. The estimated tax burden on construction organizations depending on the cost structure under different tax regimes shows that the overall tax system implies a high level of tax burden. When small enterprises switch to simplified taxation system, their production costs increase, as VAT paid on resource acquisition is not refunded but charged to production cost.
Conclusions The target level of taxation of enterprises of the construction industry is high, strongly depends on the choice of tax regime, which is in conflict with the principles of equality, neutrality, fairness and proportionality of taxation. It is crucial to introduce new tax regimes, considering the specifics of construction activities.

Keywords: general tax regime, simplified taxation system, tax harmonization, value added tax


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