Theory and Practice of Determining the Actual Tax Liability of an Individual Entrepreneur on Personal Income Tax

Abstract

The subject of the study is the mechanism for calculating personal income tax by tax authorities for individual entrepreneurs, used in the tax system of Russia in the implementation of tax control. The author solved an analytical problem consisting in the formulation of an urgent and acute problem of excessive calculation of personal income tax by tax authorities for individual entrepreneurs, and determined the optimal way to eliminate it.
The purpose of the work is to establish the optimal way to solve the problem of excessive calculation of personal income tax by tax authorities in relation to individual entrepreneurs in the implementation of tax control. In the course of the study, based on the consideration of the results of taxation of individual entrepreneurs, analysis of the regulatory framework, it was found out that when tax control is carried out, the tax authorities do not fully take into account the expenses of individual entrepreneurs, which causes artificial overestimation of net income for them and, consequently, economically unjustified taxation. Thus, it is established that the practice of tax control contradicts the theory of taxation.
The article concludes that arbitrary manipulation of expenses by the tax authorities, which often turns personal income tax into a tax on gross income, should be excluded from the practice of taxation of individual entrepreneurs. To do this, it is proposed to abolish the provision of the Tax Code of the Russian Federation on the 20% professional personal income tax deduction for individual entrepreneurs and use the calculation method instead when determining their income.