Russian Lawmakers Urged to Adopt Tax Administration Reforms

by Tatiana Smolenskaya, Tax-News.com, Moscow

22 September 2005

The budget and tax committee of the lower house of the Russian parliament, the State Duma, has recommended that the legislature adopts a new draft law aimed at improving tax administration, which, if approved, will be attached to the first part of Russia's tax code.

The draft law seeks to achieve a number of ends, one of the most important of which is the streamlining of tax audit procedures, in particular by reducing the amount of paperwork involved, in an attempt to make the system simpler and fairer for businesses, and increase tax law compliance rates.

Furthermore, the draft law stipulates that tax audits cannot be held at the same business more than twice in any one year, and must last no longer than two months. Steps towards the implementation of electronic accounting also figure in the proposals.

Other key changes in the the proposed legislation are the clarification of residency for tax purposes in Russia, and the creation of streamlined procedures for registering with local tax authorities.

The reform of Russia's tax administration forms part of measures designed to improve the general outlook of the investment community towards the country after a series of aggressive tax audits on domestic and foreign firms, and it is hoped that by doing so, the government can stem the increasing rates of capital flight from Russia.

Speaking to the Duma Budget and Tax Committee on Monday, Finance Minister Alexei Kudrin revealed that net capital outflow will increase to $10 billion in 2005, up from $8 billion in 2004.

Kudrin stated that it is the government's intention to turn this figure around to an eventual net inflow of capital.

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