13 minute read 15 Nov 2019
Woman working with laptop

How Russia is using technology to transform tax administration

By EY Global

Multidisciplinary professional services organization

13 minute read 15 Nov 2019

Real-time tax data and other advances are enhancing transparency between taxpayers and tax authorities. Learn more in this video series.

In this video series, Russian Tax Commissioner Mikhail Mishustin, the current chair of the Organisation for Economic Co-operation and Development (OECD) Forum on Tax Administration’s E-services and Digital Delivery Programme, describes how a focus on transparency and certainty are transforming tax administration in Russia, particularly around VAT.

1. Increasing VAT compliance

Now operational for three years, the Russian Federation’s updated VAT transaction system offers a more complete and transparent view of tax data. The system has created an environment of tax compliance, rather than tax evasion, reducing the so-called VAT gap from 10-11% to less than 1%.

2. Transnational tax data sharing on the rise

Tax data sharing between countries is far richer and more transparent than just a few years ago, thanks in part to the Forum on Tax Administration (FTA). Its platform enables the automatic exchange of data between partner jurisdictions, such as the G20, creating an environment of shared insights. These lessons learned have helped tax authorities in Russia develop a more collaborative relationship with taxpayers, particularly around compliance and the self-employed.

3. Transparency increasing between taxpayers and tax authorities

Transparency between Russia’s largest taxpayers and its Federal Tax Service is rising because taxpayers desire the greater tax certainty. In many cases, taxpayers are moving ahead with integrating their IT systems with those of the Tax Service.

4. Direct-data model heralds tax future

The digital revolution, particularly the internet of things, is transforming tax administration. In Russia, data from many checkout terminals feeds directly to the country’s Federal Tax Service. Accuracy is an ongoing challenge, but in the long run this real-time system will sharpen taxpayer behavior models and deliver a big-picture view not previously possible.

5. Tracking VAT transaction data

The automatic VAT control system gives tax authorities a comprehensive view of the entire Russian economy. With minimal human involvement, the system tracks and matches transaction data from buyers and sellers across the country.

6. New technology and systems boost tax certainty

Technology and other recent advances in Russian tax administration are dramatically increasing efficiency. The result is a trust-based relationship that improves certainty between taxpayers and tax authorities.

Summary

Russian Tax Commissioner Mikhail Mishustin describes how the country is shifting from a culture of tax evasion to tax compliance thanks to the use of real-time source data and other technology. VAT non-compliance, for instance, has shrunk from double digits to less than 1%.

About this article

By EY Global

Multidisciplinary professional services organization