Methods of tax capacity assessment: advantages and disadvantages

Abstract

Assessment of the tax capacity is an essential tool of tax planning. In
current economic conditions, which imply relatively low prices for major
Kazakhstan`s exports, fair evaluation of the tax potential is particularly
important process. The degree of precision of tax potential`s assesment
directly affects the effectiveness of fiscal policy`s implementation and lets
maximally balance the state budget. A fair assessment of the tax potential
contributes to the process of fiscal equalization, as regions which, for objective
reasons, have a low level of tax potential, can rely on additional
budget financing. In addition, an adequate assessment of the tax capacity
allows you to find reserves of growth of tax revenues in the event that the
tax potential is not fully realized. The paper investigated the urgency and
the need of the tax capacity`s assessment. Also it considered the nature of
the tax potential, approaches to its definition. Besides it studied key methods
of assessing tax potential, based on indexes of economic income, their
advantages and disadvantages.