Assessment of direct taxation instruments

Abstract

Creation and development of a favourable business environment in regions is unthinkable without an appropriate tax system. The research study aims to assess the direct tax system in Latvia comparing it with the tax systems in Estonia, Sweden, Finland and Denmark in order to detect common features and differences, as well as to learn the experience that could be adopted in Latvia. The research tasks are to evaluate criteria of the tax policy and to analyse development directions of the direct tax system. The monographic descriptive method, statistical methods in economics, methods of logic and construction are used in the research. Relationships between the elements of the direct tax are explored, and differences between them are determined in the research; the conclusions that could be considered for the tax system improvement in Latvia are made. Evaluation of the direct tax systems in other countries shows that only distributed profit is subject to the corporate income tax in Estonia. The progressive rates are applied to the personal income tax; non-taxable income is higher; as well the tax distribution among budgets differs. In its turn, social security contributions depend on the financing arrangements of the services provided, and the property tax rates are determined by the municipalities, and they are affected by the location of the property and purpose of its use.