ეკონომიკური პროფილი (Aug 2022)
PROBLEMS OF FORMATION OF TAX REVENUES OF THE BUDGET OF TERRITORIAL UNITS AND WAYS OF IT OVERCOMING
Abstract
Economic strength of territorial units is one of the most important factors for the economic development of the government. And for the economic stability of the territorial units it is crucial to have high level of financial decentralization and the ability to provide their budget revenues with their own tax sources, which is guaranteed by effective fiscal politics from the government. Some reforms have been going on in Georgia for decades in order to have financial decentralization and to improve the quality of budget independence, but in order to improve modern situation in this field it is necessary to develop a system of specific actions. Therefore, the problem of tax revenue optimization of territorial units is gaining more urgency and we believe that identifying the factors hindering the improvement of the tax revenues of the budget of the territorial units and taking certain actions and measures to solve them will significantly contribute to the socio-economic development of the territorial units. While working on these issues, the study of the problem was done mainly using characteristic and quantitative research methods. In terms of characteristic research we managed to get information in-depth about the main topic and then we managed to process and analyze this information. In terms of quantitative research, we were mainly guided by statistical information of the revenues of the budgets of the territorial units. Quantitative data were processed in accordance with the objectives, on the basis of which specific trends of the problem were identified. Based on the analysis of the information collected through the mentioned methods, the relevant conclusion-recommendations were formed. The issue of ownership of natural resources is important for the economic development of territorial units. Natural resources should be used in such a way to maximize the growth rate of economic development of territorial units. Part of the value added that is created as a result of industrial-economic relations using natural resources should be transferred by using the budget-tax mechanism to the budget of the municipality and/or, as it is in our case, the budget of the Autonomous Republic. Clearly, the same principle must be maintained in terms of the use of other industrial resources. Effective use of fiscal policy instruments can create a structure of tax revenues for the budgets of territorial units, the volume of which will depend on the efficient use of resources in the territorial unit. Public policy in the field of regional finance should reflect the economic activity of the region, which can provide increased productivity in the region, increased value added measures in the region, job growth and, ultimately, the well-being of the region's population. In modern conditions, budget relations in Georgia are based on the principle of independence (autonomy), however, the dependence of different levels of budgets on central budgets is very high. The share of tax revenues in the budget revenue structure of the Autonomous Republic of Adjara is more than 95% of the total revenues. This proportion is acceptable at first glance, but it is formed to the budget of the Autonomous Republic by income taxes of individual entities and it is effective, for the most part, from a fiscal point of view. It has less regulatory-stimulating character. In the long term perspective, the regulatory-stimulating role in tax-budgetary policy is crucial to achieve the tax revenue growth. Therefore, in our opinion, the use of profit and income tax as a source of tax revenue for the budget of the Autonomous Republic will ensure a more efficient result of both fiscal and stimulus-regulatory functions. Actions and measures that are aimed to increase the tax base of profit tax are possible through the use of economic mechanisms and tools, as we are talking about increasing the number of economic entities and expanding their activities. This mechanism, at the same time, will directly affect the growth of the taxable tax base. The situation in Georgia is also unfavorable in terms of the formation of tax revenues of municipal budgets because all taxes, except property taxes, belong to the central budget. The taxable base of property tax is very small, which is further reduced by the system of benefits provided by the Tax Code of Georgia. Distributed VAT is the main tax source for filling the budgets of municipalities. The existing mechanism of its distribution is ineffective. By using this mechanism, each municipality receives an almost fixed amount of money each year for the formation of the revenue portion of their budgets. It does not matter if the municipality is economically active or passive; it still receives almost the same amount of distributed VAT as it received in previous periods. This mechanism has lack of the role of stimulating economic development. Therefore, we believe it is necessary to develop mechanisms of geographical area for determining the value-added value created in a particular municipality. The amount of VAT paid by a VAT payer registered in the territory of this municipality should become the main criteria of the VAT distribution mechanism. In addition, in order for municipalities to be able to actually finance their functions, it is necessary to increase the percentage of VAT that is distributed
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