Page 23 - Azerbaijan State University of Economics

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

research to calculate the optimal level of tax burden on VAT can be used to
implement effective tax policy in such economic situations as a sharp decline in
world oil prices and the global crisis.

As we know, in order to calculate the optimal level of tax burden as a way to the
improve the fiscal policy, two types of Laffer points are distinguished in research.
The first and second kind of laffer points are levels of tax burden at which GDP and
tax revenues reach their maximum, respectively.

3. THEORETICAL AND METHODOLOGICAL BASES FOR EVALUATING
THE OPTIMAL LEVEL OF VAT
We have to note that despite the fact that the Laffer theory was proposed by an
American economist, yet in subsequent years other American economists have
criticized this theory. By contrast, Russian scientists began to study the geometric
characteristics of the Laffer curve. It should also be noted that it was Russian
scientists who introduced such concepts as Laffer points and identified the
differences between them. [Balatsky E.V. 2003].

It should be noted that in order to calculate the optimal VAT rate, it would be
advisable to identify the dependence of volumes of GDP and tax revenues on the
VAT rate. In the Russian Federation and the Republic of Azerbaijan, during the
period under study, that is, from 2006 to 2017 there were no changes in the VAT
rates. Consequently, the problem of multicollinearity arose during the construction
of the models. And it was decided to build models not based on VAT rates, but
based on the VAT tax burden.

In order to determine the optimal level of the tax burden on VAT, information was
collected on the volume of GDP and VAT revenues in Russia, Azerbaijan and
Kazakhstan from 2006 to 2017. The tax burden on VAT was calculated as the ratio
of tax revenues for VAT to GDP. The optimal the level of the tax burden on VAT
was determined by econometric modeling of the dependence of GDP and VAT
revenues on the tax burden for VAT.

4. REALIZATION OF MODELS: EVALUATION OF OPTIMAL LEVEL OF
THE TAX BURDEN ON VAT FOR RUSSIAN FEDERATION, AZERBAIJAN
AND KAZAKHSTAN REPUBLICS
First we will try to determine the level of tax burden on VAT that maximizes GDP
for Russian Federation. For this we estimate the following regression equation.

LOG(GDP_CURP_NC_RF) = C(1)*VAT_TB_RF + C(2)*VAT_TB_RF^2 + [AR(1)= C(3)] (1)

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