The Russian Tax System

The taxes system is one of the main levers of governing financial relations between the state and companies. It is made to provide financial resources for the state of hawaii in order to fix economic and interpersonal objectives. The state of hawaii influences upon economic behaviour through the tax bonuses and financial sanctions that are an important area of the taxation system. Presenting the taxes their state withdraws from companies their income in state's favour. The fiscal duty system provides a redistribution of nationwide income and creates conditions for good governance. 1

The problem of Russian complexity of taxes and taxation was that in the Soviet Union "society officially declared the structure of the first state in the world without taxes"2. This means that through the Soviet period, there was no clinical development in taxes. Economic reform in Russia intended the need for taxes reform relevant theoretical studies and the adoption of duty legislation. One of the issues that were would have to be fixed is to clarify this content of the category of "tax". 3

The Laws "About the tax system in the Russian Federation" 27. 12. 91, N 2118 - 1, defines the basic principles of taxation. Generally, they are the same for taxation of any country and are as follows

1. The level of the duty rate should be establish considering the capacity of the taxpayer (the level of income).

2. Every effort of the taxation of income must be solitary. Multiple taxation of income or capital is prohibited. A good example of this concept is the replacing of sales duty into VAT where newly created clean product is taxed only one time (until its execution there is the theory of multiplicity of tax repayment).

3. Responsibility to pay fees. The tax system should leave without doubt of the inevitability of a taxpayer repayment (process of compulsion).

4. The machine and strategies for tax repayment should be simple, understandable and convenient for taxpayers and cost-effective for firms that collect taxes (the process of flexibility).

5. The taxes system should be flexible and flexible to the changing socio-political needs (theory of efficiency).

6. The duty system should be created to ensure the redistribution of GDP and be an effective instrument of state policy. 4

Advantages and cons of Russian tax system.

The Russian tax system has been through big changes in recent years such as 1. Reduced amount of the taxes burden 2. Reduction of the list of payable fees 3. The conditions of competition are become well through the elimination of many needless privileges. These actions, combined with rouble's devaluation and favourable world market conditions for traditional Russian exports have enabled local entrepreneurs to get started on the revival of Russia's overall economy, increased production and modernized business. The Russian taxes system has become more competitive weighed against the previous period, which revealed an increase in foreign investment, capital inflows into the country, not only in trade and extractive industry. 5

But at the same time Russian Taxes system continues to be definately not be perfect.

First, Russian taxes system is insufficient benefits at the entrance to the market, especially in high technology. Specific tax breaks which were designed for residents of special financial zones and market information and telecommunication solutions do not change the entire picture. At the same time, most countries are positively fighting with Russia; they generally use theory of tax getaways, especially for income tax in the first 2-3 years right from the start of a fresh enterprise.

Second, the duty burden is significantly high and this is particularly very sensitive for enterprises processing industries. And it is not a comparison of Russian certainty to offshore areas with super tax benefits but with the major developing countries.

Third, keeping an excessive taxes burden as a result of levying value added tax (VAT). The existing system of VAT supervision generates a massive and costly system of accountability and contributes to the promises for VAT refunds. The effectiveness of the supervision remains low; the balance of payments in the budget and the return of this taxes is deteriorating.

Fourth, there is an absence of broad practice of providing investment tax credits.

Fifth, there's a lack of tax bonuses for voluntary pension and insurance systems.

Sixth, there are some legal obstacles on a way to market revaluation of investments of enterprises and the progress of depreciation, since it causes a reduction of income tax. In the end, constrained by capitalization development companies, the true purchase price of property complexes differ from the state one. This brings about a growing in its technological backwardness of the market and not only compare to developed countries but also compare to producing countries.

Seventh, there is an absence of warranties of immutability parameters of the taxes system for the investment projects for a period of their restoration. These promises on the main one hand enable the State to change the parameters of the duty system with respect to the priorities of financial policy, including consideration to improve the rates of specific fees. And on the other - allows the trader to keep tax repayments unchangeable when State can take such decisions. 6

Investment taxes credit.

Russian Federation will not recognise the dividend imputation as a form of tax bonuses.

There can be an investment tax credit as a form of tax bonuses and avoiding double taxation.

According to this article 67 of Russian Taxes Code the business 've got an chance to reduce their taxes repayments for a certain period and within certain limit followed by a phased payment of the loan amount and accrued interest.

Investment tax credit may be granted for tax company, as well as local and local fees. Investment taxes credit may be granted for a term of one calendar year to five years.

The business, which received an investment tax credit, may reduce their repayments under the relevant duty through the term of the deal about the investment tax credit.

The lowering is granted for every payment in the duty reporting period until the time when the quantity of payments that have not been paid by the business therefore of most such reductions won't became equals the total of the loan under the investment taxes credit arrangement.

Investment tax credit may be awarded to the organization in the presence of at least one of the next grounds

1) undertaking the organization of technological research or development activities or specialized re-equipment of own production, creating jobs for folks with disabilities or protecting the surroundings from pollution by commercial wastes;

2) The execution of innovative business and innovation, including the creation of new or superior technology used, the creation of new types of materials or resources;

3) The execution of this organization very important order for socio-economic development of the region or the provision of its critical services to the general public.

4) Performance of the business of express defence order.

Currently, the Russian Federation recognizes the agreements which were concluded by the past Soviet Union and continues to conduct the program of upgrading existing agreements and concludes new contracts. 7

Unless otherwise mentioned in the agreement on avoidance of double taxation, a foreign legal entity, non-resident is taxed at

20% - of all income, not related to activities in the Russian Federation through a permanent establishment, apart from income described below;

15% - on income received as dividends from Russian organizations;

10% - from the use maintenance or lease (charter) of moving vehicles or containers regarding the international transport. If the provisions of treaties on avoidance of dual taxation of foreign legal entity must post a tax agent, income paid shows the substantiation that this is a overseas legal person has long term residence in their state with that your Russian Federation offers an agreement governing the taxation issues.

Avoidance of dual taxation often takes the form of offsetting taxes paid in other countries. Regarding fees on income of a person such a credit is manufactured only with an contract on avoidance of dual taxation which contain provisions. 8


In spite of different thoughts on execution of dividend imputation I agree that it is an excellent source in scope of preventing two times taxation and stimulating investments. However in my country probably it would not have worked well because of doubt of Russian duty system. According to the Russian Finance Ministry from 25 to 40% of GDP is established in the casual sector, most of that are not covered by fees and budget does not get from 30 to 50% duty each year. 8


4 REGULATIONS "About the taxes system in the Russian Federation" 27. 12. 91, N 2118 - 1

5 A. Shokhin The Joint Platform of Russian business on taxation 2007

6 Ibid

7 The Russian Duty System 2010 Senator Membership < http://www. smsr-senclub. ru/zakon/index. php?ELEMENT_ID=2190>

8 The Russian Ministry of Funding Bulletin 2010

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