Doubts Remain Over Russian Special VAT Accounts

by Tatiana Smolenska, Tax-News.com, Moscow

11 December 2003

Whilst Russia’s tax reforms are almost complete says Prime Minster Mikhail Kasyanov, there remains some issues including refunds of Value Added Tax that are yet to be fully resolved.

The government is currently considering a proposal by the Finance Ministry to introduce special VAT accounts. These accounts would be separate from a trader or firm’s regular business account and when buying goods or services, the purchaser will pay the required amount of tax into the seller’s VAT account. This will then either be passed on to the government or paid into the account of a supplier.

Whilst acknowledging that the system had its advantages and disadvantages, the Prime Minister told a meeting of the government-sponsored Council on Entrepreneurship that further time was needed to asses the viability of the scheme.

According to the Ministry of Finance, the new system will boost government revenues by up to 100 billion rubles per year with only minimal additional administrative costs for firms.

However, reports indicate that the Economic Development and Trade Ministry has conducted its own conflicting assessment of the new system which argues that the new VAT accounts will place a huge additional administrative burden on business.

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