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Survey calls for new taxation rules to be more efficient
Our Russian member firm recently conducted a survey to analyse the efficiency of the new taxation rules implemented since the beginning of 2009. Over 66% of companies operating in Russia voted for an increase in the liability that may be imposed on the tax authorities for their actions. In all 70% of the companies polled consider the reduction in the corporate profit tax rate to be the most beneficial change in taxation for companies in 2009.
Such a position is attributable to the fact that the taxpayer and its officers can be held administratively and criminally liable for every error that they make, whereas the tax authorities and their employees assume virtually no liability. This was the most frequent response received by Pepeliaev, Goltsblat & Partners, our Russian member firm, when it performed its recent survey. A simplified procedure for refunding VAT was the second most desired change in tax legislation, cited by approximately 60% of polled respondents. 45% of businesses polled mentioned, as the third most popular change, the possibility that the government scrapped its plans to replace the unified social tax with "insurance contributions".
Over 100 companies operating in Russia participated in the survey, including 38% of the largest companies, 34% of large companies and 28% of medium-sized companies. PG&P conducted the survey by polling chief accountants, the financial directors and heads of tax departments. The polled participants were representatives of the following areas of the economy: construction and real estate (19%), sales (19%), services (17%), finance and leasing (16%), production (11%), fuel and energy sector (9%), telecommunications (7%), transport (1%) and IT (1%).
In all 70% of the companies polled consider the reduction in the corporate profit tax rate to be the most beneficial change in taxation for companies in 2009. The second material change for business concerns the option to pay VAT in installments over three months, securing the support of 66% of those polled. The introduction of a VAT deduction on advances paid has also facilitated business activities for almost 40% of the companies. "The introduction of a deduction on advances paid could have had an even greater effect if a simple and comprehensible procedure had been provided for its application," explained Vadim Zaripov, head of the analytical service of Pepeliaev, Goltsblat & Partners, Taxand's exclusive Russian member firm. "A total abolition of taxation on advance payments would have been even more effective".
Over 70% of the companies have still not applied the accelerated depreciation method that was introduced. Unlike the straight-line depreciation method, it enables the taxpayer to deduct over 50 per cent of the value of the fixed assets purchased during the first quarter of their lives. According to Vadim Zaripov, "this is primarily attributable to the complexity of implementing this method in accounting systems". Approximately 40% of respondents complained about the need to reinstate the depreciation premium if the fixed asset is sold before the expiry of a five-year period. Over 30% declared that they had encountered difficulties attributable to the differences existing in financial accounting compared to tax accounting.
Based on the survey results, it can be concluded that not all the anti-crisis tax measures declared by the government proved efficient in practice. The key obstacles tended to be the ambiguity of legislation and difficulties in applying the innovations practice. At the same time, further clarifications and simplification could help to enhance the efficiency of the new rules.
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