The tax rate for a business that raises prices may increase

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The Ministry of Finance issued a statement that, in their opinion, the rate should remain ad valorem – that is, the greater the profit, the more taxes the company should pay from it.

The proposal that came to the Ministry proposed a plan for tax increases in proportion to prices. The more often a company decides to raise the price, the more often the tax rate will increase for it. However, according to the existing system, it is impossible to do this.

In market conditions, supply and demand directly affect the price of goods. Its turnover will affect not only the price, but also the quantity of the goods produced. An increased rate for such companies will either have a minimal impact on the situation, or will not stop the price increase at all.

As mentioned earlier, at the moment there is an ad valorem rate in the country. It is not fixed, does not have a single total size and is calculated individually for each company in accordance with the amount of profit received. The most popular and well-known ad valorem rates at the moment are VAT, which is 20% of the cost of goods, or personal income tax, which is 13% of income.

A change in the tax calculation rules could have a negative impact on business. In this case, the tax would increase along with the annual increase in prices for goods and services. Price increases are a standard process that depends on many factors and, in particular, may depend on the key rate. It greatly affects prices – because of the high percentage of companies are not going to take loans, investors are not interested in buying shares and investments, which significantly reduces the demand for goods and services.

Although prices should fall in such conditions, in some areas they are only beginning to rise. In the end, this may lead to a complete lack of sales, but the company will pay more tax than it paid before the price increase. Therefore, the Ministry of Finance refused the offer, although it is difficult to say what will happen later when the economy returns to its standard state.