ACIG Experts Participate in Discussion about Current Issues in Tax Legislation at Gaidar Forum

Real dimension of development is the key topic of the second day of Gaidar Forum, a unique intellectual platform and a meeting point for theorists and practitioners, the world leading scientists and politicians and influential representatives of global financial and business elites.

The experts talked about transfer pricing, emphasized major challenges in the field of taxation and proposed some ways of handling those challenges during the discussion, entitled Current Issues of Tax Legislation.

Representatives of the leading companies rendering consulting and audit services, among other, Yury Fedyukin, Member of the Board at ACIG and Director of the Department for Legal and Tax Consulting; Maksim Skorokhodov, Director of the Department for Audit and International Financial Reporting Standards at ACIG; Svetlana Shatalova, Head of RANEPA Tax Policy Research Laboratory; Maria Mikhaylova, Senior Associate at PwC Legal tax dispute resolution group; Vadim Zaripov, Head of the Analytical Department at Pepeliaev Group; Marina Belyakova, Partner at EY (Cross Border Tax Advisory); Valery Ilyichenko, Head of the Main Directorate for Labor and Employment in Sevastopol, participated in the discussion. Anna Zolotareva, head of the Legal Research area of the Gaidar Institute for Economic Policy, moderated the discussion.

The experts contemplated on upgrading the tax legislation and discussed the law on taxation of profit of controlled foreign companies.

Mr. Ilyichenko commented on the possibility to assume a foreign company as a Russian Federation resident that was opened up for Russian business on 1 January 2015. “As Russian businesses have no considerable guarantees, a compromise was reached: Businessmen were offered to pay taxes under the Russian law while still being a foreign country. This can be useful for Russian businessmen since a foreign law may be applied with regard to them,” he said.

Mr. Ilyichenko said that the problem of companies that want to be declared tax residents is the necessity to enter into an international agreement. “It is not clear how the companies that possess no such agreement are discriminated. Many companies do not want to undergo the procedure for tax registration because of the necessity to disclose a great amount of information, in fear that they would be punished ‘for their past’,” he said.

The draft law is not a call-up for coming back to Russia, Mrs. Belyakova said. “This is rather an actual question to business whether they can maintain a company in Cyprus or in the Netherlands. Do you have people in there, an office? Do they function in any way, or it’s just that you hire ten office cleaners so they make whatsoever decisions? The moment that businessmen begin to consider themselves in a serious and realistic way is the moment when transition to Russia takes place,” she said.

“The issue that arises in the course of deoffshorization is not whether the tax will be collected, but that the authorities ask where the money comes from. This is primarily the question of personal liberty, not collection of extra taxes,” she said.

“I would like to consider the issues of taxation from a different prospective, that is, from the natural person’s one. The return of the money accumulated in financial holdings located abroad to the Russian legal competence is another goal. The point is those who want to hide will do this anyway. There is no point in cherishing illusions that this law all by itself will be able to bring out all those who did their best to cover themselves as owners of any given assets into the open or discover someone’s money,” Mr. Fedyukin said.

Mr. Zaripov talked about the existing tax burden and mentioned that fiscal charges need to be systematized: There are over 30 charges not covered by the Tax Code on the regional level. “A new charge not included into the fiscal charge set was introduced literally at the end of the year. There are also parking charges and so on. This leads to a ‘sprawl’ of the system. This indicates inefficiency of expenditure. This means a covert increase of tax burden. These are charges not accountable to the state. For a physical person, this means lowering of the degree of protection, inability to control their expenses. Inventory control is needed here. Monitoring of expenditure and uniform legal regulation need to be introduced. A uniform register has to be created,” she said.

Mr. Skorokhodov believes that it is not correct to refer to this as something new. “A certain foundation has been created; relevant approaches have been developed. When the law on transfer pricing was adopted, its point was not only in simplification of tax administration, but also taking the weight regarding the control of market prices off the medium-size businesses. There are still some innovations, and they lie in the definition of independence. Before, if operations were conducted between fellow subsidiaries, these were not controlled. This issue has been fined-tuned,” he talked about the practical aspects of transfer pricing.

Mrs. Mikhaylova talked about some matters in controversy during VAT-related litigations. “What should be done with stolen goods? The court ruled to not charge VAT on the goods; however, the company had to prove its combating the vanishing of the goods,” she exemplified her point, adding that courts pronounce ever more judgments in favor of tax authorities.