Questions are examined about the nature and role of taxes in the formation of production costs. It is noted that the mechanism of relations between business entities and the state is based on taxation. The degree of its development determines the tax capacity of production. The cost index should be an objective economic expression of the production process, which justifies the illegality of including taxes in the composition of costs of economic entities. Otherwise, the cost index does not give an idea of the real basis for calculating the profitability of management, since taxes have acquired a transformed form of costs.