This year there has been a significant decrease in the number of tax disputes and tax-related litigation cases, according to Ernst & Young’s 2010 Russia Tax Survey
Moscow, 24 November 2010 ― This year’s survey results show that there has been a significant decrease in the number of tax disputes and tax-related litigation cases. This reduction may be due to the changes in tax law introduced on 1 January 2009, which require a taxpayer to appeal to the highest tax authority before going to court (“pre-judicial stage”).
Ernst & Young Russia has collected tax survey responses from both Russia-headquartered and Multinational companies working in different industries and regions of the Russian Federation over the last six years.
“As for specific comments on the tax authorities’ performance, our respondents still consider the tax authorities’ overall performance to be on an “average” level,” says Petr Medvedev, Ernst & Young Partner and Head of the Tax and Law Practice in the CIS. “A form-over-substance-oriented approach and lack of independence are considered to be the most undeveloped areas in the opinion of our respondents.”
The survey reveals that the deductibility of expenses and the reimbursement of excess input VAT are still considered to be the most challenging issues for Russian tax legislation and tax administration. In contradiction to the positive changes in excess input VAT reimbursement, we noted a slight increase in the timing of excess input VAT reimbursement this year from three-four months to four-six months. Additionally, the respondents continue to believe that the pre-judicial handling of taxpayers’ complaints is one of the most undeveloped areas of tax administration in Russia.
The Russian tax regime is generally seen to have a negative impact on investment. Half of the responding Russia-headquartered companies believe that the tax regime has a neutral impact on investments in Russia, while the rest mostly consider it not to be attractive for investment. Multinational companies share a more negative view of the tax regime’s impact on investments in Russia.
According to the survey, companies operating in Russia face increased attention to tax matters not only as a result of expanding operations, but also due to the ambiguity of tax legislation and unreasonable scrutiny by tax inspectors. It has thus become more important for companies to ensure that there is an adequate tax function and processing in place to handle tax matters and tax risks. The financial crisis created new challenges for tax functions, since dealing with an excessive tax burden and unexpected tax claims has become unacceptable in the new economic environment.
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