Shatalov Scotches Talk Of Russian Sales Tax

by Tatiana Smolenskaya, Tax-News.com, Moscow

25 September 2006

Russia's Deputy Finance Minister, Sergei Shatalov, has stated that the government has no intention of replacing value-added tax with a sales tax, as was recently suggested by a senior Kremlin aide.

Addressing a tax reform seminar in Moscow last Friday, Shatalov explained that there is no compelling reason why the government should replace VAT with a sales tax, despite the fact that it has acknowledged that administrative problems exist within the VAT system.

"I don't think that VAT will be replaced with a sales tax and this will likely be for the long-term. I think the government will stand by this," he said.

Arkady Dvorkovich, the head of the Expert Directorate with the Putin administration, told an audience at the Moscow International University earlier this month that a switch to a sales tax would be beneficial because the current VAT system is becoming increasingly complex to administer, particularly with regard to export operations. He said this could be done over a two-year period from 2009 to 2011 with little disruption to businesses.

However, according to Shatalov, rather than replace the VAT system wholesale, the government plans to tackle the administrative issues within the current system.

"We are planning to conduct a series of measures connected with managing the risks of this tax," he stated.

These measures would simplify VAT payment procedures and make it harder for people to cheat the system, Shatalov revealed.

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