More precision in taxation: Entrepreneurs report higher satisfaction with the tax service, but question the government’s commitment to supporting business

(Moscow News – themoscownews.com – Anastasia Matveyeva, Moskovskiye Novosti – Dec. 17, 2012)

Market participants are recognizing that the Federal Tax Service has started to work more efficiently, according to statistics presented at a tax summit at RIA Novosti’s press center.

“In 2000, 1,350,000 tax inspections of corporate entities were carried out, and the average level of additional charges was 188,000 rubles,” said Sergei Pepeliaev, managing partner of the law firm Pepeliaev Group, at the discussion last Wednesday. “For the first 10 months of this year, 34,000 inspections were carried out, with an average additional charge of 5,500,000 rubles.”

These figures attest that the tax authorities have started to work in more detail. This can only demonstrate the thaw in the mutual relationship between businesses and the FTS ­ in any case, that is what data from opinion polls show.

75 percent positive rating

The FTS carried out a survey among entrepreneurs in 2012, asking what attitude they had to the tax authorities, and it emerged that 80 percent of entrepreneurs assess their work as “good.” From statistics of the small and medium-sized business organization Opora and the Trade and Industry Chamber, 55 percent of entrepreneurs consider the activities of the FTS “positive” and 20 percent “highly positive.”

“This is close to those indicators that the FTS itself gives,” Pepeliaev said. “This is not a bad rating, but I have not seen one entrepreneur who would have participated in this poll.”

If a businessman does not agree with the result of a tax inspection, he may turn first to a higher tax authority, and not in vain: according to statistics, 50 percent of additional fines are overturned as a result of review of appeals by a higher authority. Eventually many appeals go to court, where it is possible to confront corruption. Here the businessman has a choice: either spend on judicial expenses, or “grease palms.” And it is not known which is cheaper.

“The tax inspector considers it necessary to give him a bribe in order to annul the results of an inspection ­ 10 percent of the possible fine, or 20 percent of the possible fine,” Pepeliaev said. “But if the taxpayer does not want to give a bribe, but wants to protect himself by legal methods and go to court, then this same 10 percent, paid for legal help from the sum of the fine, is this reasonable or not?”

Cancellation of credits

The burden on business increases as much with risks of corruption, as with new initiatives of the authorities. The trend for the cancellation of part of the tax credits for business has been clearly marked out, said Dmitry Fadeyev, deputy chairman of the Trade and Industry Chamber’s advisory council for the improvement of tax legislation.

“In the document ‘The Fundamental Directions of Tax Policy for the Coming Seven Years,’ the Finance Ministry proposes carrying out a stage-by-stage review of tax credits,” Fadeyev said. The economic crisis in the euro zone, the unstable situation in the markets, of course, do not give a reason to lower taxes, but the state should think whether it wants businesses to pay taxes in Russia.

“Why are thousands of Russian companies re-registered in Kazakhstan?” Fadeyev said. In Russia, the rate of insurance deposits in nonbudget funds has been raised to and remains at 30 percent.

15-15-15

The entrepreneurs’ organization Delovaya Rossia came forward last year with the project of a so-called “tax maneuver:” the lowering of the VAT rate, tax on profits and on transfers to non-budget funds to 15 percent, the so-called “15-15-15” formula.

Financing falling incomes was proposed on account of an increase in excise on tobacco and alcohol, and in the mineral extraction tax on oil. The excise taxes proved higher as a result ­ that is, the government listened to the second part of Delovaya Rossia’s tax proposals, but no one plans to lower taxes. “Now, specifically, business should raise the question of lowering the tax burden.

Now in our country are the years of plenty, the years of good economic conditions on the supplies of raw materials,” said Marina Zaikova, chairman of the committee of the advisory council of Delovaya Rossia. “Especially now we need to ease the life of producers ­ that is, the developers of business ­ in every way possible. Otherwise, either there will be no more medium-sized business in this country (it will die), or it will go to another jurisdiction.”

The authorities swiped from Delovaya Rossia not just the idea of raising excise: the idea of the creation of 25 million jobs through 2025 also belongs to the organization and comes into its program of new industrialization, and President Vladimir Putin used it in his electoral program without attributing its authorship, Zaikova said. In addition, without real support for medium-sized business, which can also create jobs, the idea will not work.