Page 21 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.76, # 2, 2019, pp. 21-30

ASSESSMENT OF LAFFER POINTS OF THE I AND II TYPES
OF VAT (ON THE EXAMPLE OF RUSSIAN FEDERATION,
KAZAKHSTAN AND AZERBAIJAN REPUBLICS

AYNUR SULEYMANOVA 1

1 Institute of Control Systems of ANAS
E-mail: [email protected]

Received 30 January 2019; accepted 24 May 2019; published online 27 December 2019

ABSTRACT:
Tax burden, i.e. the ratio of the tax revenues and the aggregate taxable income, is an
important macroeconomic variable and economic policy instrument which account
for the tax burden and the revenue structure in the economy. The macroeconomic
regulation function in the context of taxation comes to its own mainly over the value
added tax (VAT). The effectiveness fiscal policy in general as well as tax policy in
particular depends mainly on the VAT-level in the economy. In the framework of this
paper we focus on the performance three post-Soviet Republics, Russian Federation,
Azerbaijan and Kazakhstan in terms of the VAT-policy and its efficiency. Due to the
completely new emergence of the tax system in all three mentioned states, the paper in
hand is a kind of assessment of the different economic policy approaches in these three
country cases. From this point of view, a comparative analysis of the present situation of
the tax system of these countries is an interesting area. We estimate the optimal levels
of the tax burden on VAT on the basis of econometric models and the Laffer points
of the types I and II were determined for each case study. It should be noted that the
Laffer point of the type I is the level of tax burden at which the volume of total
output reaches its maximum, and at the Laffer point of the type II, the amount of tax
revenue reaches its maximum.

Key words: taxes, tax burden, VAT, optimal tax burden, Laffer point.

JEL classification: C1, C13

1. INTRODUCTION
As it is known, taxes have 5 main functions: fiscal, distributing, regulating,
integrating and controlling functions. All types of taxes in varying degrees, perform
one or more of these functions. Along with ensuring a substantial part of budget
revenues, VAT also performs the function of the regulation. By calculating and
reimbursing VAT at all stages of production, as well as the collection of this tax
from the final consumer, it is possible to control the economy at all levels. Despite
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