This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
  • Delicious




VAT System Discouraging Foreign Investment In Russia

by Tatiana Smolenska, Tax-News.com, Moscow

09 August 2002

The Moscow Times on Thursday published a damning report revealing that Russia's poorly organised VAT regime is discouraging foreign investment and angering currently resident multinational companies such as Mars and United Technologies.

Examining in detail the situation facing the latter organisation, the newspaper revealed that one of its joint ventures, Hamilton Standard Nauka has ambitious expansion plans, but because of the Tax Ministry's repeated failure to refund the VAT payments due to it as an exporter, is increasingly reluctant to increase its investment in the country.

'Legitimate exporters like HSN are becoming increasingly frustrated by the ministry's reluctance to refund VAT. In HSN's case, at the current rate, by the end of the year the ministry may owe it as much as $1 million, nearly 20% of its annual revenues,' the Moscow Times reported, continuing: 'Richard Brody, President of United Technologies in Moscow, said his people have tried every channel available to them, but success remains several steps away. Until the problem is resolved, he said, HSN will not be able to expand.'

The Russian Tax Ministry explained that such a high degree of vigilance is necessary in order to weed out unscrupulous exporters whose businesses only exist on paper.

'In a number of cases, bad-faith taxpayers turn tax refunds from a form of export stimulation into a source of illegal earnings by taking large sums from the budget.'

However, local tax experts suspect that the real reason for the ministry's stalling on this issue is that the money is needed to balance the government's books.

'There really is a problem with VAT refunds, which is partly due to the financial problems and limitations of the budget,' Anatoly Aksakov, Deputy Chairman of the Duma's Economic Policy and Business Committee told the Moscow Times. 'The government tries to partially solve its problems by not fulfilling its obligations to refund VAT.'

.

 

 






Write a comment