Tax revolution in Russia
Tired of fighting tax avoidance, Russia intends to abandon the tax system in its modern sense and adopt a simple and uncomplicated set of rules for the payment of taxes.
A group of Members of Parliament introduced a bill abolishing the greater part of the Tax Code and replacing the complex system of rules by two principles.
First, instead of numerous taxes there will be just one payable at 20 per cent of income or 5 per cent of revenues. Second, which of the two options should be applied will be determined by the tax authorities upon receipt of tax returns after the end of the fiscal year.
In essence, the proposed system is a development of the so-called simplified system which has been successfully used for a number of years for the taxation of small companies.
The simplified system of taxation was adopted in 1996 and replaced all taxes, including VAT, by one payable as a percentage of turnover or revenue. The practice has been extremely positive: tax collection increased and penalties fell.
The advantage of this system, despite its apparent primitivism, is the ease of administration and the lack of incentives for so-called tax planning.
‘We hope that the new system,’ says MP Alexander Petrov, ‘will put an end to the practice of tax evasion, and that the number of tax inspectors could be reduced by half.’
However, the bill has not found support among tax advisers and lawyers. ‘In theory we all are for simplifying of the tax system,’ on condition of anonymity said a leading tax expert, ‘in practice we can’t wait until Russian tax reaches the complexity of, say, American taxation where most people can't make head nor tail of it.’
April 1, 2010
photo: NatalyArt - Fotolia.com
NO LIMITS TO PERFECTION
TEXT: Vladimir Biriulin, partner, Gorodissky & Partners
Russia is steadily improving its law system. It is common knowledge that brevity is the soul of wit.
In the wake of progressive changes which abolish the Tax Code it is expected that the Civil Code Part IV will also be cancelled, not entirely but in a very significant part. Currently, a number of issues bring disparity within the legal regulation of intellectual property. There are patents, trademarks, designs and so on. All this makes it difficult to find a universal approach to the solution of the multifarious problems which arise during the conduct of business.
The revolutionary changes which nevertheless are logical and compliant with the strategy of streamlining the Russian law will make the IP law user-friendly. It is expected that a unified “IP unit” will be introduced instead of the cumbersome variety of IP topics. In this manner IP regulation will be made easy to understand for the business players. Whatever they wish to protect (which is now called a patent or a trademark, etc.) they will file an application for an “IP unit” which will be processed in a single IP department in the Patent Office instead of many today.
In fact, the first steps in that direction were made in 2008 when the concept of the so called “unified technology” was introduced in Russian law. It proved its viability so the time has come to develop that success further.
