Microeconomic Effects of Indirect Taxes

Abstract

Throughout its entire history Russian tax system has been built on the prevalence of indirect taxation. In the Russian tax system such taxes account for more than 60 % and their level and amount has a significant impact on the economy. The ratio between direct and indirect taxes is one of the indicators of the quality of the tax system. Unlike direct indirect taxes increase the formed price of products (goods, works, services), the final payer of indirect taxes is the buyer. Indirect taxes have a more complex impact on economic processes through pricing, both at the macro level and at the micro level. We defined the role of indirect taxes in the regulation of processes at the micro level, namely, the functioning of economic agents in the course of their production, distribution, consumer, and exchange activities. The research found the following microeconomic effects of indirect taxes: changes in supply and demand; deformation of the behavior of economic agents; decrease in entrepreneurial activity; the emergence of an additional factor of production. The study also showed possible consequences of the increase in the rates of indirect taxes for the country's economy.