Taxation

The disciplines “Introduction to taxation” and “Taxation” pursues the goal of helping the students in formation and development of the theoretical knowledge in the field of taxation.

The taxation problems are playing an important role within the market economy. Taxes, as obligatory and non-repayable payment, set by the legislation, constitute the main source of state revenues formation. The government uses tax rates and tax privileges to stimulate the development of certain industries, to influence the consumption structure, to encourage the investments in development of the national economy.

By using the taxation the government is able to implement purposefully the social programs and finance other needs of the country. Proceeding from this, it is determined the importance of studding the disciplines “Introduction to taxation” and “Taxation”, that provides the knowledge of basic notions about the taxation and taxation systems.

This set of lessons was elaborated in such a way that allows covering the theory of taxation, i.e. its economical content, functions, elements, principals of their levying and the classification of taxes as well as the taxes role in the conditions of marker economy, putting the accent on the particularities of the taxation system in the Republic of Moldova.

Lecture 1. Taxation-the Concept and the Science

1. Origins and historical development of taxes

2. Economic content of taxes

3. Functions of taxation

4. The role of taxation in modern states

5. Theories about state regulation of the taxation system

Part 1. Origins and Historical Development of Taxes

Taxes form an element of the social existence. Human society is heterogeneous for natural and physiological reasons. Already in antiquity this made people unite their efforts and wealth for the purpose of responding to natural disasters and external enemies, as well as in order to build common towns, to support the people not able to work and to provide for many other social needs. Taxes constitute an integral attribute of the state.

Taxes became a necessary element of the socio-economic relations at the formation of the state. The development and transformation of the state’s organisational forms were always associated with a modification of the taxation system. In the periods of slavery, states used taxes in the form of natural charges and duties (i.e. by collecting food, harvest items, etc., of personal obligations), but with the development of commodity-monetary relations, taxes took a monetary form. Primary taxes were initially applied directly on wealth through land and individual taxes. Secondary taxes appeared later, initially in the form of internal customs charges, and with the development of commodity-monetary relations, in the form of excises, which were paid by all the free individuals.

In Ancient Rome, during peace times there were no taxes, but in times of war, citizens were subjected to taxes applied in accordance to their wealth. The tax rate (or the census) was determined once in 5 years. In the IV-III centuries B.C. the Roman state was expanding, new towns-colonies were being conquered and the taxation system was changing as well. Community (local) taxes and duties were being introduced in the colonies. Rome was becoming an empire. The main source of income for the Roman provinces was the land tax; on average its rate constituted 1/10 of the revenue from the land area. Other taxation forms were also used, for example, the tax on fruit trees or vine plants. In addition, chargeable to taxation were real estate, live assets (horned cattle and slaves), and other valuables.

In addition to direct taxes, there were indirect ones, the most important of which were:

-Transactions taxes, usually at the rate of 1%

-Special taxes on slave transactions of 4%, and

-Taxes on the release of slaves at the rate of 5% of their market price.

Already in the Roman Empire taxes played not only a fiscal role, but also had the function of stimulating economic development. At that time taxes already had a monetary form, which forced the population to generate surplus production for sale. This promoted the expansion of commodity-monetary relations, an intensification of the division of labour and of the urbanisation process.

Many economic traditions of the Ancient Rome were adopted in the Byzantine Empire. In the early Byzantine period of up to the end of the VII century, the empire had 21 types of direct taxes, including:

- Land taxes

- Individual duties

- Army maintenance taxes

- Taxes on the purchase of horses

- Recruit taxes, which released the person paying the tax from military obligations

- Charges on the sale of merchandise (usually around 10-12.5%)

- Charges for issued state documents

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