Protective interest as a factor of increasing competitiveness of companies

Abstract

The paper shows one of the approaches to finding potential active instruments of fiscal policy aimed at protection of owner's equity and prevention of distribution of company's inflationary earnings. We pointed out the key negative consequences of distribution of virtual profit which is a result of application of conventional accounting principle by matching current revenue with historic cost, i.e. consistent application of cost principle in the conditions of general price rise. The paper also deals with mechanisms of protective interest which should lower the price of capital, improve goods competitiveness, and increase the wealth of equity owner and citizens in general. The aim of the research was to show that the implementation of protective interest as a specific instrument of recognition of compensation for entrepreneurial capital invested in the state tax system could result in evasion of taxation of inflationary (virtual ) profit. This is particularly significant in the countries with high inflation, low participation of equity and high unemployment.

Keywords

• competitiveness
• interest
• protection
• capital
• inflation