586
.pdfWhat do the Bahamas, Bermuda, Hong Kong, Liberia, the Netherlands, the New Hebrides, Panama, and Switzerland have in common? They are all «tax havens».
Essentially, a tax haven is a place where foreigners may receive income or own assets without paying high rates of tax upon them. Although, strictly speaking, not all tax havens are countries, we can refer to them as such here for the sake of convenience. In some havens the tax relief that foreigners enjoy stems from the absence of the chief forms of direct taxation — income, estate, and gift taxes; but in most countries the relief stems from special features of the tax system that result in a very low effective tax rate on certain forms of foreign investment.
Even though the list of tax havens includes several developed countries, most are developing countries. It is precisely their example that other developing countries are tempted to follow, in the hope that becoming a tax haven will help them solve some of their economic problems.
Tax haven operations consist fundamentally in establishing within a tax haven country one or more legal entities, such as trusts, personal holding companies, or corporate subsidiaries, and attributing to them income earned elsewhere in order that it should be taxed at the country's low rates-or perhaps not taxed at all. This objective is usually accomplished by either
(1)accumulating income in the tax haven country at low rates of tax to be withdrawn later and invested elsewhere according to the investor's wishes; or
(2)artificially shifting business profits from high-tax countries to a tax haven country.
Low tax rates are perhaps the principal attraction offered by tax havens. Usually these low rates are associated with income taxation; in fact, what springs to mind immediately upon hearing the words «tax haven» is the absence of income taxation that exempts foreign investors. Though it is true that many of the advantages offered by tax haven countries are income tax advantages, these are by no means the only benefit that these countries offer to foreign investors.
Within the tax field, the absence of other taxes such as estate, inheritance, and gift taxes may be as important to certain investors as the absence of an income tax. Bilateral tax treaties between a tax haven country and some of the major developed countries are another feature that may attract investors. The existence of a tax treaty allows third-country investors to base their holding companies in tax havens and obtain a reduction in withholding taxes applied to the dividends and interest they receive from developed countries with which the tax haven country has the tax treaty.
Strict and well-enforced rules of banking secrecy and, in general, the possibility of doing business without close supervision by government agencies are additional attractions usually offered by tax haven countries. Other factors, such as the low cost of doing business, the existence of liberal banking regulations, and the absence of exchange controls are also important. Finally, a good communications service, a well-developed legal system with an abundance of legal and accounting expertise, and, above all, a high degree of political and financial stability also help to make a country successful as a tax haven.
Words you may need:
for the sake of convenience — из соображений удобства tax relief — налоговая льгота
to enjoy (v) — (зд.) пользоваться
to stem from — происходить, проистекать из gift tax — налог на дарение
to be tempted — испытывать соблазн trust (n) — траст
holding company — холдинговая компания subsidiary (n) — дочерняя компания
to attribute (v) — приписывать {кому-л.), относить (за счет/на счет чего-л.) to accomplish (v) — осуществлять
what springs to mind — первое, что приходит в голову exempt (v) — освобождать от уплаты налогов bilateral (adj) — двусторонний
well-enforced — (зд.) действенный abundance(n) — изобилие,избыток
3. Study the scheme below and complete the text.
Purposes of Taxation — the Four «R»s
Repricing
Revenue
Taxation
Redistribution |
Representation |
The main purpose is_______________: taxes raise money to spend on roads, schools and hospitals, and on more indirect government functions like market regulation or justice systems. This is
the most widely known function.
The second is _________________. Normally, this means transferring wealth from the richer sections of society to poorer sections.
The third purpose of taxation is_______________. Taxes are levied to address externalities: tobacco is taxed, for example, to discourage smoking, and many people advocate policies such as implementing a carbon tax.
The fourth, consequential effect of taxation in its historical setting has been
_________________. The American revolutionary slogan «No taxation without
_________________» implied this: rulers tax citizens, and citizens demand accountability from their rulers as the other part of this bargain. Several studies have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance, while indirect taxation tends to have smaller effects.
4. Read the texts and:
(a) single out the main facts of each text. Present them in a short review;
(Text A) What is Payroll?
One of the largest expenses that most businesses incur on a regular, ongoing basis is payroll. Payroll represents the compensation that is regularly paid to the employees of a business organization. Labor costs and the related payroll taxes represent a large and constantly increasing portion of the total cost of operating most business organizations. Based on the dollar expenditures and the governmental regulations relating to payroll, it is one of the most important accounting activities. Although the worker tends to think in terms of his or her payroll check at the end of the particular payroll period, there is more to payroll than just takehome pay. All employees of a business organization receive compensation for the activities they perform within the organization. The compensation is known as salary, wages, commissions or piecework earnings.
The amount earned by an employee, whether paid on an hourly, weekly, monthly, piecework, or commission basis, is the employee's gross pay. Gross pay is the total earnings of the employee for the particular payroll period. The amount of money the employee actually takes home is known as take-home pay or net pay. Net pay is arrived at by subtracting certain deductions from the gross pay. Deductions consist of
various taxes that the employer is required to withhold from the employee's pay or a regular basis that coincides with the payroll period in use.
The typical deductions made by the employer from the employee's gross pay include:
Social Security Tax (FICA)/Medicare Tax.
Federal Income Taxes Withheld.
State and Local Income Taxes Withheld (where applicable).
State Disability Insurance (where applicable).
Other Voluntary Deductions.
(Text B) Social Security Tax
The Social Security tax is the result of the Federal Insurance Contributions Act (FICA). This act provides for monthly pension benefits to be paid to retirees, for survivor benefits, and for disability benefits. The Social Security tax is levied on all employees, the funds received going to support the previously mentioned programs.
This tax is known as a non-progressive tax because every individual has withheld from his or her salary the same percentage, regardless of the amount of the earnings for the pay period. The tax rate for 1990 was 7,65 % of the gross pay of the employee. There was a ceiling on the amount of gross pay subject to this tax. For 1990 the employee was taxed on the first $51,300 earned during the calendar year. In 1990, the Social Security rate actually consisted of two components, 6,20 % was the actual Social Security tax rate. The 1,45 % balance represented the Medicare tax rate. As far as the taxpayer and the employer were concerned the total Social Security tax rate amounted to 7,65 %.
Beginning in 1991, the federal government separated the Social Security tax rate from the Medicare tax rate. Both rates remain the same today, but the ceiling for social security was increased to $94,200 for tax year 2006. In 1992, the Medicare ceiling was eliminated, thus all wages earned were subject to the 1,45 % Medicare tax. Obviously, a person who earns $50,000 during calendar year 2006 will have Social Security tax and Medicare tax withheld only up to that amount earned. In 2006 a wage earner who earned wages totalling $100,000 would pay Medicare tax on the entire amount, while paying Social Security tax on the first $94,200, which is the Social Security tax ceiling for 2006.
(Text C) Federal Income Tax
The federal income tax is a pay-as-you-go tax. The amount withheld from the employee's salary every pay period is not actually a tax, but rather is income withheld in anticipation of the federal income tax. All employees (individuals) are considered to be calendar-year taxpayers, that is, calculation of their federal income taxes is based on earnings from January 1 through December 31 of any calendar year. By the following April 15, each taxpayer is required to prepare and submit an income tax return covering the preceding calendar year. The tax liability of the individual is determined on the basis of the income tax return, and the funds withheld by the employer are matched against the tax liability. If the amount withheld during the year is in excess of the actual tax liability, the taxpayer is entitled to a refund. If the tax liability is greater than the total federal income tax withheld, the taxpayer owes the balance, known as balance due, which must accompany the income tax return. The calculation of the payroll period federal income tax withheld is based on three factors:
1)earnings for the pay period;
2)marital status;
3)number of allowances claimed by the taxpayer.
Since the federal income tax is a progressive tax, the more money the taxpayer earns, the greater will be the percentage of his or her income paid in taxes. A single individual is considered to have lower expenses than a married person and thus has a somewhat greater amount withheld.
For example, an individual who is single and earns $170 per week, claiming one withholding allowance, will have $6 withheld from his or her wages. If that same individual earned $180 a week, $7 would be withheld; earnings of $190 result in withholding $8.
A married individual earning $180 a week will have $3 withheld if zero allowance is claimed. The same earnings with one allowance claimed will result in no money being withheld.
(b) compare the social security tax and federal income tax in the USA with similar taxes in the Russian Federation.
5.Make a free translation of the text below. Interpret the main ideas!
Налоговая нагрузка
Всоответствии с учетной политикой для целей налогообложения ОАО «РЖД» определяет доходы и расходы по методу начисления. Практически каждый пятый заработанный рубль Компании направляется на уплату налогов. За 2007 г. начислено к уплате в бюджет налогов и обязательных платежей в общей сумме 174,4 млрд р., c ростом к 2006 г. на 2,4 %. В счет оплаты налогов направлено денежных средств в бюджеты всех уровней в размере 179,2 млрд р.
Суммы налогов, уплаченных денежными средствами в 2007 г., снизились по сравнению с 2006 г. на 1,4 млрд р., или на 0,8 %, что обусловлено уменьшением уплаты налогов в федеральный бюджет на 11,7 млрд р., или на 22,2 %.
НДС. Снижение налоговых платежей по налогу на добавленную стоимость по сравнению с предыдущими периодами вызвано, прежде всего, изменением российского налогового законодательства. С 1 января 2007 г. отменена специальная процедура возмещения НДС по экспортным операциям с представлением отдельной налоговой декларации по НДС по ставке 0 %, по которой решение о возмещении входного НДС по экспортным операциям выносилось налоговыми органами после проведения камеральной проверки в течение 3 месяцев со дня сдачи налоговой декларации. С 1 января 2007 г. экспортный НДС (по ставке 0 %) отражается вместе с внутренним НДС (по ставкам 10 %, 18 %) в единой налоговой декларации, и его возмещение носит заявительный характер. Кроме того, в 2007 г. увеличились налоговые вычеты по налогу в связи с увеличением ввода в эксплуатацию объектов основных средств, предусмотренных инвестиционной программой ОАО «РЖД».
Также в 2007 г. из федерального бюджета был возмещен НДС по налоговой ставке 0 % за 2006 г. в размере 5,5 млрд р. В 2007 г. внесено в бюджет денежными средствами по налогу на добавленную стоимость 17,1 млрд р. Таким образом, всего в 2007 г. зачтено в счет оплаты НДС 32,6 млрд р.
Налог на прибыль, подлежащий уплате в федеральный бюджет и бюджеты субъектов Российской Федерации, за 2007 г. составил 35,0 млрд р., что больше, чем в 2006 г., на 4,2 млрд р., или на 13,6 %. Фактически внесено налога на прибыль в консолидированный бюджет в 2007 г. 30,8 млрд р. Уменьшение уплаченной суммы налога на прибыль за отчетный период связано со снижением налогооблагаемой базы по налогу на прибыль за 2007 г., что обусловлено увеличением суммы амортизационной премии на 4,3 млрд р. в связи с вводом в эксплуатацию объектов основных средств, предусмотренных к вводу в 2006 г. Кроме того, в 2007 г. авансовые платежи по налогу на прибыль, внесенные в IV квартале 2006 г. в сумме 4,7 млрд р., были зачтены в уплату текущего налога.
При номинальной ставке 24 % по налогу на прибыль в 2007 г. в соответствии с Налоговым кодексом Российской Федерации эффективная ставка по налогу на прибыль ОАО «РЖД» составила 35,5 %.
Вбюджеты субъектов Российской Федерации и муниципальных образований в 2007 г. внесено 75,8 млрд р. Рост налоговых платежей в региональные и местные бюджеты по сравнению с 2005– 2006 гг. составил соответственно 29,0 % (уплачено 58,8 млрд р.) и 1,2 % (уплачено 74,9 млрд р.). Рост платежей произошел за счет роста платежей по налогу на имущество, земельному налогу, налогу на доходы физических лиц.
Рост налога на имущество в 2007 г. по сравнению с 2005–2006 гг. составил 38,7 % и 15,3 % соответственно. Увеличение суммы налога за 2007 г. на 252 млрд р. произошло из-за переоценки основных средств по состоянию на 1 января 2007 г., ввода в эксплуатацию и модернизации объектов основных средств.
Сумма перечисленного в бюджет земельного налога за 2007 г. увеличилась по сравнению с 2005 г. на 48,2 %, с 2006 г. — на 36,2 % за счет принятия на баланс новых участков земли, изменения ставки налога в сторону увеличения по некоторым муниципальным образованиям, а также увеличения стоимости земельных участков по некоторым регионам.
Также в 2007 г. увеличилась сумма внесенных платежей в фонды обязательного социального страхования, по сравнению с 2005 г. — на 23,8 %, с 2006 г. — на 17,7 %.
Give a short presentation on tax accounting policy in JSC RZD.
ASSIGNMENT
1.Classify each of the following as (a) an involuntary deduction or (b) a voluntary deduction:
1) Charitable contributions;
2) Federal income tax;
3) Disability insurance tax;
4) FICA tax;
5) Payroll savings plan.
2.Classify each of the following as (a) paid entirely by an employee, (b) paid entirely by an employer, or (c) paid jointly by the employer and the employee:
1)FICA tax;
2)Federal income tax;
3)Unemployment compensation tax.
3. Calculate the income tax using the following information:
*** Taxes are most often levied as a percentage, called the tax rate. An important distinction when talking about tax rates is to distinguish between the marginal rate and the effective (average) rate. The effective rate is the total tax paid divided by the total amount the tax is paid on, while the marginal rate is the rate paid on the next dollar of income earned.***
If income is taxed on a formula of 5 % from $0 up to $50,000, 10 % from $50,000 to $100,000, and 15 % over $100,000, how much will a taxpayer with income of $175,000 pay?
DISCUSSION
Discuss the following questions and present your ideas.
1.How do taxes in Russia compare with taxes in other countries?
2.What is difference between tax evasion and tax avoidance?
3.Are people beginning to understand that paying taxes is in their interest?
4.What measures could improve tax collection in Russia?
5.Is there a need to soften the burden of taxation in our country?
UNIT 5. AUDITING
PRE-READING
Discuss these questions.
1.What is the difference between auditing and accounting?
2.For which groups of people is the work of the auditor important?
READING
Scan the text and find the answers to the following questions:
What is the function of the auditor?
Is it important for auditors to be completely independent?
Auditing is the process in which an independent and competent accountant — auditor examines a firm’s accounting records and financial statements and offers an opinion on their accuracy and reliability. An auditor accumulates and evaluates evidence about information related to a specific economic entity for the purpose of determining and reporting on the degree of correspondence between the quantifiable information and established criteria.
There are different types of audits, for example, financial statements audits, income tax audits, «value for money» audits, environmental audits, administrative audits, financial management audits, etc.
The accountancy profession has built up a significant amount of expertise in performing financial statements audits.
Accounts audits were established as an instrument to protect third parties, the users of accounts, since the auditor’s opinion helps establish credibility of financial statements.
Special bodies of users, such as supervisory boards, employee representatives, government agencies may sometimes need an indepth audit report, which is usually confidential.
It should be stressed that auditors do not monitor, they offer an opinion, and the audit process and audit procedures are complicated and manifold. The auditor’s opinion is gradually being built up from a mass of detailed work to the final judgement through the planning and testing stages. The auditor normally starts with a study of the business environment the audited company is working in and performs a preliminary analytical review.
Then he should direct his attention to the financial statements. Interestingly enough, however, the auditor’s attention is not directed towards the financial statements’ elements as such, but towards the correctness of various assumptions made by the management for their preparation. For instance, the auditor needs to know if figures are complete and accurate and reflect what they should reflect, if income and expenses are recorded in the proper periods and if the legal position is reflected adequately.
The auditor should focus on any misstatement whether it is intentional or unintentional. The management is responsible for the reliability of financial information. If the management is not prepared to take the responsibility it may be hard to complete the audit. In such situations the auditor should seek his own evidence by means of independent audit procedures.
Although the financial statements are the ultimate objectives of an audit, normally such audits cannot be completed without a proper study and evaluation of the accounting system and assessment of the internal accounting controls.
Defining the audit strategy the auditor has to decide whether to rely on internal controls or to resort to substantive testing applying analytical review procedures, such as tests in totals, comparison with budgets or even statistical analysis of figures.
In the planning stage as well as during the performance of audit procedures and, finally, in forming conclusions, «materiality» and «audit risk» are critical elements in the auditor’s judgement. «Materiality» refers to the magnitude or nature of a misstatement (including an omission) of financial information.
«Audit risk» (including three different components — inherent risk, control risk, detection risk) is the risk that an auditor may give an inappropriate opinion on financial information that is materially misstated.
The natural finalization of the audit process is the auditor’s report, reflecting the auditor’s opinion on the financial statements. Unfortunately, audits do not always end up in an approval of the financial statements. Any deviation from the unqualified opinion should be explained in the auditor’s report, including the uncertainty or the disagreement that caused the auditor to qualify his opinion.
In order to protect the public interests and the profession’s integrity an individual must be sufficiently educated and adequately trained before being certified to act as an auditor.
Auditing is an examination conducted by auditors which involves checking the physical existence and valuation of assets and examining the internal control’s system to ensure the correct recording of transactions. The objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.
WORDS AND EXPRESSIONS FOR READING COMPREHENSION
1.auditing (n) auditor (n) audit (n)
2.to examine (v)
3.to offer an opinion
4.accuracy (n)
5.reliability (n)
6.quantifiable (adj)
7.to build up (v)
8.auditor’s opinion
9.credibility (n)
10.supervisory board
11.indepth audit report
12.audit procedures
13.manifold (adj)
14.judgement (n)
15.planning stage
16.testing stage
17.preliminary analytical review
18.assumption (n)
19.legal position
20.misstatement (n)
21.(un) intentional (adj)
22.to seek evidence
23.ultimate objective
24.substantive testing
25.tests in totals
26.to form a conclusion
27.materiality (n)
28.audit risk
29.critical (adj)
30.magnitude (n)
31.omission (n)
32.inherent risk
33.control risk
34.detection risk
35.approval
36.deviation (n)
37.unqualified opinion
38.to qualify the opinion
39.integrity (n)
40.to certify (v)
аудит
аудитор аудит, аудиторская проверка, ревизия
проверять, проводить ревизию сделать заключение (по результатам аудиторской проверки) точность достоверность, надежность
поддающийся количественному определению наращивать, накапливать
заключение аудитора, аудиторское заключение
вероятность, достоверность
наблюдательный совет детальный аудиторский отчет
методика проведения ревизии / аудиторской проверки разнообразный, многосторонний суждение, оценка стадия (этап) планирования стадия (этап) проверки
предварительный анализ финансово-хозяйственной деятельности
предположение допущение, предпосылка юридическое положение, юридический статус
сообщение неверных (неправильных) сведений, искажение сведений
(не) преднамеренный искать доказательства конечная цель независимая проверка проверка итоговых чисел сделать вывод
«существенность» (искажения)
риск некачественного контроля (зд.) решающий
величина, размер
пропуск (зд.) присущий (виду деятельности) риск
риск контроля риск (не) обнаружения (зд.) подтверждение отклонение
безусловное мнение (оценка, заключение) дать аудиторское заключение с оговорками
добросовестность, профессиональная честность
выдавать свидетельство
READING COMPREHENSION
1. Find English equivalents for the following Russian phrases from the text.
Проверять (подвергать ревизии) учетную документацию; давать заключение в отношении точности и достоверности финансовой отчетности; аудит финансовой отчетности; ревизия правильности начисления подоходного налога; аудит оптимального использования денежных средств; аудит мероприятий по защите окружающей среды; ревизия правильности действий руководства; проверка эффективности финансовой деятельности руководства; деловая среда, в которой работает проверяемая компания; аудиторы обращают свое внимание на правильность предположений руководства; преднамеренное или непреднамеренное искажение данных; брать на себя ответственность за…; процедура проведения аудиторской проверки; оценка системы внутреннего контроля; прибегать к независимым проверкам; анализ финансовохозяйственной деятельности; подтвердить финансовую отчетность; безусловное заключение
2.Match English and Russian equivalents.
1)Supervisory boards and government agencies may sometimes need an indepth audit report, which is usually confidential.
2)«Materiality» and «audit risk» are critical elements in the auditor’s judgement.
3)Accounts audits were established as an instrument to protect the users of accounts.
4)Audit was conducted in accordance with generally accepted auditing standards.
5)The accountancy profession has built up a significant amount of expertise in performing financial statements audits.
6)Auditors do not monitor, they offer an opinion on their accuracy and reliability.
7)The auditor’s opinion helps establish credibility of financial statements.
a)Аудит счетов является инструментом защиты интересов пользователей финансовой отчетности.
b)Учетные работники накопили значительный опыт в проведении аудита финансовой отчетности.
c)Наблюдательным советам и ведомствам иногда нужен глубокий аудиторский отчет, который является, как правило, конфиденциальным.
d)«Материальность» и «риск некачественного контроля» являются исключительно важными факторами при формировании заключения аудитора.
e)Аудиторская проверка была проведена в соответствии с общепринятыми стандартами аудита.
f)Заключение аудитора делает финансовую отчетность надежной.
g)Аудиторы не контролируют, они дают заключение в отношении точности и достоверности финансовой отчетности.
3.Use the information in the text to answer the following questions.
1)What is auditing?
2)What audits are practised nowadays?
3)What does the auditor’s opinion help establish?
4)How is an audit planned?
5)What do auditors normally start with?
6)What do auditors direct their attention to when they analyse financial statements?
7)What responsibilities do managers (directors) undertake with regard to the audit?
8)What are the responsibilities of auditors?