586

2)Making a sale on credit will increase the sales revenue figure (and a profit or a loss — unless the sale was made for a price that precisely equalled the expenses involved). No cash will change hands at this point, however.

3)Buying a non-current asset for cash obviously reduces the cash balance of the business, but the profit figure is not affected.

4)Receiving cash from a receivable (debtor) increases the cash balance and reduces the receivable's balance. Both of these figures are on the balance sheet. The income statement is unaffected.

5)Depreciating a non-current asset means that an expense is recognised. This causes the value of the asset, as it is recorded on the balance sheet, to fall by an amount equal to the amount of the expense. No cash is paid or received.

6)Buying some inventories for cash means that the value of the inventories will increase and the cash balance will decrease by a similar amount. Profit is not affected.

7)Making a share issue for cash increases the owners' claim and increases the cash balance; profit is unaffected.

3.Complete the accounting equations and explain how they represent financial statements.

1)

+

-

-

=

Capital

Non-current assets / Non-current liabilities / Current assets / Current liabilities

2)

-

) +

Assets

=

+ (

Liabilities

/ Expenses /

Capital

/ Sales revenue

DISCUSSION

Discuss the following questions and present your ideas.

1.Why is it necessary to be knowledgeable about financial statements?

2.Would you say that the balance sheet, the income statement and the cash flow statement complement each other? Support your answer.

3.How can we use financial statements to evaluate the company’s performance?

4.How can you explain the relationship between the balance sheet, the income statement and the cash flow statement? Use the following scheme.

Owners’

claim

Balance sheet at the start of the accounting period

Cash and cash equivalents

Income statement

Cash flow statement

Owners’

claim

Balance sheet at the end of the accounting period

Cash and cash equivalents

UNIT 4. TAXATION

PRE-READING

Discuss these questions.

1.What is the tax climate in Russia? How are businesses and individuals taxed?

2.Is taxation system closely connected with the financial reporting requirements?

READING

Scan the text and find the answers to the following questions:

What are the functions of taxation?

Are taxation systems different throughout the countries?

The first known system of taxation was in Ancient Egypt around 3000 BC. Records from that time say that the pharaoh would conduct a biennial tour of the kingdom, collecting tax revenues from the people. Early taxation is also described in the Bible. It states: «But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children.» A share (20 %) of the crop was the tax.

Funds provided by taxation have been used by states throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law and public order, protection of property, economic infrastructure (roads), public works, social engineering, and the operation of government itself. Most modern governments also use taxes to fund welfare and public services. These services can include education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. In economic terms, taxation transfers wealth from households or businesses to the government of a nation. The side-effects of taxation and theories about how best to tax are an important subject in microeconomics. Taxation is almost never a simple transfer of wealth. Economic theories of taxation approach the question of how to minimize the loss of economic welfare through taxation and also discuss how a nation can perform redistribution of wealth in the most efficient manner.

Taxes are a compulsory financial contribution by a person or a business towards the expenditure of a public authority. In modern economies taxes are the most important source of government revenues.

Taxes are considered to have three functions:

fiscal or budgetary, to cover government expenditure, to provide the public authorities with the revenue required for meeting the cost of defence, social services, interest payments on the national debt, municipal services, etc.;

economic, to give effect to economic policy, to promote stable economic growth, to influence the rate of economic growth of the nation;

social, to increase the economic welfare of the community, to lessen inequalities in the distribution of income and wealth.

Businesses and individuals are subject to many forms of taxes. Taxes on income (i. e. on wages, salaries, profits, dividends, rent and interest) and on capital are known as «direct» taxes. Taxes on commodities or services are known as «indirect» taxes.

In the USA nearly all of the federal government's revenues come from taxes. By far the most important source of tax revenue is the personal income tax. Gross receipts from corporate income taxes yield a far smaller percentage of total federal receipts. Individual states levy their own taxes. As a result, for example, the profits of a corporation are liable to federal and sometimes state corporate income taxes. This often

imposes a double tax burden. When the after-tax income is paid out to stockholders as dividends, it is then taxed again as personal income.

In the United Kingdom there is no single code of tax law. Tax assessments are normally based on returns issued by the Board of Inland Revenue for completion by the taxpayer. While companies may receive tax returns, they normally submit instead a copy of their annual accounts together with a computation of taxable profits.

Under Russian law, all Russian legal entities, whether they have foreign investment or not, are subject to the profit tax law.

Russian taxes provide revenue for three tiers of the budget: federal, regional and local. The major taxes paid to the budget are: profit tax; value-added tax (VAT); securities tax; withholding tax.

Tax returns for Russian legal entities are audited by the tax authorities at the time they are submitted.

When a company resident in one country receives income or capital gains from a source in another, or when shareholders and company are domiciled in different countries it is possible that incomes arising will be taxable in each country, i. e. taxed twice. Many countries seek to mitigate the potentially harmful effects of double taxation by entering with other countries into double tax treaties, or arrangements preventing the same income being taxed twice.

Along with cases of illegal evasion of tax obligations there are entirely legal ways of avoidance by which a person may so arrange his affairs as to minimize, or even eliminate, tax liability on his property and income.

A tax is a compulsory financial contribution imposed by a government to raise revenue, levied on the income or property of persons or organizations, on the production costs or sales prices of goods and services, etc.

WORDS AND EXPRESSIONS FOR READING COMPREHENSION

1.taxation (n)

2.tax (n)

3.tax revenue

4.direct taxes

5.indirect taxes

6.biennial (adj)

7.household (n)

8.enforcement of law

9.public order

10.welfare (n)

11.unemployment benefit

12.to transfer (v)

13.to approach (v)

14.compulsory (adj)

15.to lessen (v)

16.inequality (n)

17.receipts (n)

18.to yield (v)

19.to levy (v)

20.liable to taxes

21.to impose (v)

налогообложение, взимание налогов налог доход от налогов, налоговые поступления

прямые налоги косвенные налоги

двухлетний, двухгодичный домашнее хозяйство, семья соблюдение закона общественный порядок благосостояние пособие по безработице переводить, передавать приближаться всеобщий уменьшать, сокращать неравенство

денежные поступления давать результат, приводить облагать налогом

подлежащий обложению налогами облагать, налагать налоговое бремя

сумма обложения, установление налоговых

22.tax burden

23.tax assessments

24.tax return

25.board of inland revenue

26.completion (n)

27.tier (n)

28.value added tax (vat)

29.tax authorities

30.to submit (v)

31.capital gains

32.to domicile (v)

33.to seek (v) (sought, sought)

34.to mitigate (v)

35.double taxation

36.double tax treaties

37.arrangements (n)

38.to prevent (v)

39.evasion (n)

40.avoidance (n)

41.to eliminate (v)

42.tax liability

ставок (зд.) налоговая декларация

Налоговая служба Великобритании завершение, окончание уровень, ярус

налог на добавленную стоимость (НДС) налоговые органы представлять доход от прироста капитала

поселиться на постоянное место жительства искать стремиться смягчать, уменьшать двойное налогообложение

договор об избежании двойного налогообложения

меры, мероприятия препятствовать, предупреждать уклонение отмена, исключение, уклонение

устранять, исключать обязательства по уплате налогов

READING COMPREHENSION

1. Find English equivalents for the following Russian phrases from the text.

Получать доходы от сбора налогов; включать военные расходы; соблюдение закона и общественного порядка; защита собственности; общественные работы; социальное строительство; система здравоохранения; побочное действие налогообложения; минимизировать потери экономического благосостояния; орган государственной власти; покрывать расходы государства; влиять на темп экономического роста; экономическое благосостояние общества; важный источник налоговых поступлений; бремя двойного налогообложения; вместе с расчетом налогооблагаемой прибыли; незаконное уклонение от налоговых обязательств.

2.Match English and Russian equivalents.

1)	tax on wages	a)	налог на процентный доход
2)	tax on salary	b)	налог на капитал
3)	tax on profit	c)	подоходный налог
4)	tax on dividend	d)	налог на заработную плату
5)	tax on rent	e)	налог на ценные бумаги
6)	tax on interest	f)	налог на прибыль
7)	tax on capital	g)	подоходный налог с заработной платы в соц. фонды
8)	value added tax	h)	налог на добавленную стоимость
9)	income tax	i)	налог на жалование служащих
10)	securities tax	j)	налог на дивиденды
11)	withholding tax	k)	налог на рентные платежи

3.Use the information in the text to answer the following questions.

1)What were the first records of taxes?

2)What public expenditures are covered with funds raised through taxation?

3)Do issues of taxation refer to macroeconomics or microeconomics?

4)How can you define the term «a tax»?

5)What are the three key functions of taxes?

6)What are the purposes of direct and indirect taxation?

7)What is the major source of government’s revenue in the USA?

8)Who controls tax rates in the UK?

9)Do taxes in Russia provide revenue only for the federal budget?

10)In what situations can incomes be taxed twice?

11)What is the difference between tax evasion and tax avoidance?

4.Make up a plan of the text and be ready to speak about the role of taxation. Use the following phrases:

• I’d like to speak on the problem of …;

• To illustrate this point I could give an example …;

• Despite the fact that…;

• In addition,…;

• In general, …;

• The main advantage of … is that …;

• I’d like to conclude by highlighting the fact that ….

VOCABULARY PRACTICE

1.Match the opposites.

1)	tax burden	a)	regressive
2)	facilitate	b)	include
3)	indirect	c)	enforce
4)	progressive	d)	lessen
5)	optional	e)	compulsory
6)	enlarge	f)	prevent
7)	eliminate	g)	maximize
8)	minimize	h)	tax heaven
9)	major	i)	minor
10)	break	j)	direct

2.Match the synonyms.

1)	welfare	a)	tax
2)	compulsory	b)	responsible
3)	lessen	c)	abolition
4)	seek	d)	dwell
5)	levy	e)	prosperity
6)	prevent	f)	obligatory
7)	avoidance	g)	mitigate
8)	domicile	h)	guard
9)	liable	i)	end
10)	completion	j)	look for

3. (a) Think of the nouns that are often used with the following verbs.

to levy, to collect, to tax, to impose, to introduce, to pay, to reduce, to avoid, to evade, to exempt

Make your own sentences.

(b) Think of the verbs that are most commonly used with.

tax, taxation, profits, revenue, claim, effects, noncompliance, tax rate, burden of taxation, privilege, income,

Make your own sentences.

4. Match the verbs from (A) with the nouns from (B) below.

	A		B
1)	to reduce	a)	economic welfare
2)	to improve	b)	taxes
3)	to correct	c)	inequality
4)	to increase	d)	revenue
5)	to check	e)	imports
6)	to withhold	f)	business
7)	to tax	g)	adverse balance of payments

5. Match these expressions with tax to their definitions.

1)	tax avoidance	a)	someone who lives in another country for tax reasons
2)	tax bracket	b)	to introduce a new tax on something
3)	tax evasion	c)	to make the tax go up
4)	tax exempt	d)	when you don't have to pay tax on certain income
5)	tax exile	e)	to cancel a tax
6)	to abolish tax	f)	tells you what amount of tax to pay based on income
7)	to impose tax	g)	trying not to pay tax (legal)
8)	to increase tax	h)	to increase tax

6. All the words below can be combined with ‘tax’ or ‘taxation’ in a two-word partnership (e.g. tax accounting, progressive taxation). Add ‘tax’ and/or ‘taxation’ before or after the following

words. Translate the phrases.
1)	__________ accounting _________		________ inspector _________
		14)
2)	__________ allowance _________	15)	________ loophole __________
3)	__________ authority __________	16)	________ loss __________
4)	__________ avoidance _________	17)	________ payer __________
5)	__________ consultant _________	18)	________ progressive ________
6)	__________ corporation ________	19)	________ rates __________
7)	__________ deductible _________	20)	________ rebate __________
8)	__________ direct __________	21)	________ regressive _________
9)	__________ evasion __________	22)	________ return __________
10)	__________ free __________	23)	________ sale __________
11)	__________ haven __________	24)	________ shelter _________
12)	__________ income __________	25)	________ withholding _______
13)	__________ indirect _________	26)	________ year _________

7. Complete the sentences with proper verb. Use the correct form.

avoid

levy

be liable

lower deduct

pay

evade

raise

1)If you inherit a lot of money, you _____________for capital transfer tax.

2)In some countries, employers have to ____________ tax from your pay and ______________ it directly to the tax authorities, so employees have no possibility of ____________ income tax.

3)Some people hire expensive accountants to tell them how to ____________ taxes — legally, of course!

4)The government always tries to _____________ taxes in the year before elections.

5)The government has a huge deficit and is going to have to _____________ either the rate of VAT or income tax.

6)The government ____________ special taxes on petrol, alcohol and tobacco.

8.Use the following words to fill in the gaps. Translate the sentences.

abolish bracket breaks exempt exile increase property return

1) The government needs more money, so it is planning to ____________

taxes.

2)He earns a lot of money — he must be in the highest tax ______________.

3)She lives there because she has to — she's a tax _______________.

4)They are planning to ______________the tax on large company cars, and replace it with a tax on all company cars.

5)She is a student, so she is tax _______________.

6)The government is planning to introduce new tax ______________ for IT companies.

7)Don't buy a house this year — the ______________taxes are being abolished next March.

8)A tax _______________ is the same as a tax declaration — it's a list of income and tax deductible expenditure for the tax authority.

9.Match each definition on the right with a term from the box. Write the English term and its Russian equivalent for each definition.

capital gains tax		corporation tax	creative accounting		excise
		duty
income tax	loophole	money laundering progressive tax			tax loss
tax deductable	tax evasion tax haven		tax shelter	value added tax

)		People pay this tax on the money they earn.
)		Companies pay this tax on their profits.
)		Profits from the sale of assets may be subject to this tax.
)		Government tax on things such as cigarettes, alcohol and petrol.
)		This kind of tax means that the more money you earn, the higher
		the rate of tax you have to pay.
)		A clever but still legal way of reducing the amount of tax to an
		absolute minimum.
)		A country such as Liechtenstein and the Bahamas where tax is low.

A mistake in the law which allows people to avoid paying tax.

)

These payments are not subject to tax.

)

In the accounts the company is seen to make this if capital ex- 0) penditure is brought forward to use up profits.

This tax is added to the price of goods and services.

1)

Avoiding paying tax by giving false information to the authorities.

2)

Investment schemes which allow people to postpone paying tax.

3)

Handling money made from illegal activity.

4)

10.Choose the correct words to complete each sentence.

1)The tax on wages and salaries is called _______________. In Britain the tax on business profits is called corporation tax.

a) direct tax

b) income tax

c) wealth tax

2)A tax that is levied at a higher rate on higher incomes is called a ____________...........tax.

a) progressive

b) regressive

c) value-added

3)Property taxes, sales taxes, customs duties on imports, and excise duties on tobacco, alcoholic drinks, petrol, etc. are _____________ taxes.

a) direct

b) indirect

c) value-added

4)Most sales taxes are slightly ______________ because poorer people need to spend a larger proportion of their income on consumption than the rich.

a) progressive

b) regressive

c) repressive

5)A sales tax collected at each stage of production, excluding the already-taxed costs from previous stages, is called a ______________.

a) sales tax

b) value-added tax

c) added-value tax

6)Profits made from the sale of assets are liable to a _____________ tax.

a) capital gains

b) capital transfer

c) wealth

7)Gifts and inheritances are usually liable to ______________ tax.

a) capital gains

b) capital transfer

c) wealth

8)Reducing the amount of tax you pay to a legal minimum is called _________.

a) fiscal policy

b) tax avoidance

c) tax evasion

9)Making false declarations is called _____________ and is obviously illegal.

a) creative accounting

b) tax avoidance

c) tax evasion

10)Bringing forward capital expenditure (on new factories, machines, and so on) so that at the end of the year all profits have been used up is known as making a ______________.

	a) mistake	b) tax haven	c) tax loss
11)	Multinational companies often set up their head offices in low-tax countries such as Liechtens-
	tein, Monaco, the Cayman Islands, and the Bahamas, known as ____________.
	a) tax haven	b) tax heavens	c) tax shelters
12)	Criminal multinationals such as the Mafia tend to pass money through a series of companies in
	very complicated transactions in order to disguise its origin from tax inspectors and the police;
	this is known as _____________ money.
	a) cleaning	b) laundering	c) washing

11. Make a free translation of the following text into English and make a presentation on the purposes of taxation.

Налоги

Налоги возникли вместе с товарным производством, разделением общества на классы и появлением государства, которому требовались средства на содержание армии, судов, чиновников и другие нужды.

В эпоху становления и развития капиталистических отношений значение налогов стало усиливаться: для содержания армии и флота, обеспечивающих завоевание новых территорий — рынков сырья и сбыта готовой продукции, казне нужны были дополнительные средства.

Изъятие государством в пользу общества определенной части стоимости валового внутреннего продукта в виде обязательного взноса и составляет сущность налога. Взносы осуществляют основные участники производства валового внутреннего продукта: работники, своим трудом создающие материальные и нематериальные блага и получающие определенный доход; хозяйствующие субъекты, владельцы капитала, действующие в сфере предпринимательства.

За счет налоговых взносов, сборов, пошлин и других платежей формируются финансовые ресурсы государства. Экономическое содержание налогов выражается, таким образом, взаимоотношениями хозяйствующих субъектов и граждан, с одной стороны, и государства, с другой стороны, по поводу формирования государственных финансов.

Законодательством установлено, что объектами налогообложения являются:

•прибыль (доход);

•стоимость определенных товаров;

•добавленная стоимость продукции, работ и услуг;

•имущество юридических и физических лиц;

•передача имущества (дарение, наследование);

•операции с ценными бумагами;

•отдельные виды деятельности;

•другие объекты установленные законом.

Один и тот же объект облагается налогом данного вида только один раз за установленный период налогообложения (месяц, квартал, полугодие, год).

Общее количество налогоплательщиков определяется количеством юридических лиц (коммерческих и некоммерческих), численностью граждан, зарегистрированных в налоговых органах в качестве предпринимателей без образования юридического лица, численностью граждан, уплачивающих подоходный налог по месту получения заработной платы.

Налоговая система РФ представлена совокупностью налогов, сборов, пошлин и других платежей, взимаемых в установленном порядке с плательщиков — юридических и физических лиц на территории страны. Все налоги, сборы, пошлины и другие платежи «питают» бюджетную систему РФ.

SUPPLEMENTARY READING PRACTICE

1. Scan the text and answer the following question:

What are the taxes paid on the following?

alcoholic drinks and tobacco products company profits goods bought in stores

money received from relatives after their death salaries and wages

goods made in other countries money made by selling stocks at a profit

Direct taxes are collected by the government from the income of individuals and businesses.Individuals pay income tax on their wages or salaries, and most other money they receive.

Most countries have a capital gains tax on profits made from the sale of assets such as stocks or shares. This is usually imposed or levied at a much lower rate than income tax.

A capital transfer tax (commonly called death duty in Britain) is usually imposed on inherited money or property. Other names for this tax are inheritance tax or estate tax.

Companies pay corporation tax on their profits. Business profits are generally taxed twice, because after the company pays tax on its profits, the shareholders pay income tax on any dividends received from these profits.

Companies and their employees also have to pay taxes (called national insurance in Britain) which the government uses to finance social security spending — unemployment pay, sick pay, etc.

Indirect taxes are levied on the production or sale of goods and services. They are included in the price paid by the final purchaser.

In most European countries, companies pay VAT or value-added tax, which is levied at each stage of production, based on the value added to the product at that stage. The whole amount is added to the final price paid by the consumer. In Canada, Australia, New Zealand and Singapore, this tax is called goods and services tax or GST.

In the USA, there are sales taxes, collected by retailers, levied on the retail price of goods.

Governments also levy excise taxes or excise duties — additional sales taxes on commodities like tobacco products, alcoholic drinks and petrol.

Special taxes, called tariffs, are often charged on goods imported from abroad.

Income tax for individuals is usually progressive: people with higher incomes pay a higher rate of tax (and therefore a higher percentage of their income) than people with lower incomes. Indirect taxes such as sales tax and VAT are called proportional taxes, imposed at a fixed rate. But indirect taxes are actually regressive: people with a low income pay a proportionally greater part of their income than people with a high income.

To reduce the amount of income tax that employees have to pay, some employers give their staff advantages instead of taxable money, called perks, such as company cars and free health insurance.

Multinational companies often register their head offices in tax havens — small countries where income taxes for foreign companies are low, such as Liechtenstein, Monaco, the Cayman Islands, and the Bahamas.

Using legal methods to minimize your tax burden — the amount of tax you have to pay is called tax avoidance. This often involves using loopholes — ways of getting around the law, because of an error or a technicality in the law itself. Using illegal methods — such as not declaring your income, or reporting it inaccurately — is called tax evasion, and can lead to big penalties.

(a)Decide whether the following statements are true (T) or false (F). Find reasons for your answers.

1)Capital gains are generally taxed at a higher rate than income. ____

2)The same sum of money can be taxed more than once. ____

3)Sales taxes can be both proportional and progressive at the same time. ____

4)Excise duties are extra sales taxes on selected products. ____

5)Many international companies have their registered headquarters in small countries where they do only a small proportion of their business. ____

6)Employees will generally pay less tax if their employer reduces their salary a little and provides them with a car. ____

7)Tax avoidance is illegal. ____

8)Perks and loopholes are forms of tax evasion. ____

2. Read the text and:

(a)Sum up the text in 5-7 sentences and present your summary;

(b)Giveyouropinionon«taxhavens».

Tax Havens Explained