Tax should not be too taxing

In 2009 tax revenues in Russia fell by third. Nonetheless, the State plans to ease pressure on companies. It means, in practice, that the taxmen’s attention will be selective but clingy. Authorities will concentrate on big and audacious.

The Parliament has started hearings on the draft law to soften an overall approach to the criminal investigation of tax fraud. The bill, approved by the Government, will free a defaulting taxpayer from prosecution if all taxes, interests, and penalties were paid.

The practice of ‘active repentance’ was a popular and effective weapon in the late 1990-s. In 2003, when the Yukos case started, Vladimir Putin insisted that the law would be changed. One of the last businessmen who used the provision to avoid criminal prosecution was Vasiliy Shakhnovskiy, the head of Yukos-Moscow. He repented on 53 million roubles (about 2 million US dollars). Mikhail Khodorkovskiy and Platon Lebedev were less lucky.

The law, also, intends to raise the threshold of the amount of unpaid tax, as the formal criterion necessary for starting a criminal investigation, from 100 thousand roubles (USD$3.4 thousand) to 500 thousand (USD$16.7 thousand) for individuals, and from 500 thousand roubles to 1.5 million (USD$50 thousand), for companies.

At the same time it is planned to speed up the VAT refund. By August 1, 2009 the amount of VAT repaid was 21 billion US dollars - even one day of delay is painful for business. In reality companies wait over 6 months.

It is intended to turn the VAT refund from a tedious saga into a routine transaction and cap the period of expectation by 30 days. To prevent fraud the companies applying for repayment will have to provide a letter of guarantee from a bank for the amount requested. However, big companies, those with substantial assets or revenues, will not need a bank backing because ‘such companies do not disappear’.
Law ‘On Changes to Article 346.20 of the Part II of the Tax Code’ plans to widen the powers of the regions and allow them to set different rates of tax for different categories of taxpayers that use the simplified system of taxation. Earlier they were given the right to low the rates, and now similar companies are being taxed differently in various parts of the country.



October 19, 2009