The Problems and Directions for Improving the Functioning of the Simplified Taxation System

Ensuring the sustainable development of the national economy requires government authorities to seek effective solutions in the field of taxation. The main functions of taxes are fiscal and regulatory, and achieving their effective implementation has led to the identification of two subsystems in taxation: the general system and the alternative simplified system. The introduction of the simplified taxation system to boost business activity and reduce informal economic practices has produced positive results; however, its continued operation facilitates the use of this tax status by economic entities for partial tax evasion, unfair competition, minimizing general business expenses, and so forth. The article demonstrates that the simplified taxation system primarily fulfills a regulatory function rather than a fiscal one. Problematic aspects of the simplified taxation mechanism have been identified: low fiscal efficiency; use for minimizing tax payments and tax evasion; use as a tool for unfair competition; reduction in the quality of management accounting; splitting business activities into parts to obtain the status of a single tax payer; one of the factors contributing to the short life cycle of small business entities; a factor limiting business communications; coverage of a limited range of activities; restrictions on the use of certain financial and economic instruments available to entities under the general taxation system. Proposals have been made to improve the functioning of the simplified taxation system: continuation of the practice of limiting the types of activities eligible for the simplified taxation system; in-depth analysis of the condition and development prospects of an entrepreneurial entity when granting the status of a single tax payer; application of the practice of a limited period in the simplified taxation system to gain temporary competitive advantages for business development; expansion of the range of single tax rates to reinforce its fiscal function and/or regulatory influence on the development of local communities; withdrawal of legal entities from the scope of simplified taxation, etc.