Law enforcement officers seize documents from the Moscow Federal Tax Service office, January 19, 2007
Photo: Dmitry Lebedev
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Tax Service Advises Self-Audit
Federal Tax Service director Mikhail Mokretsov signed a decree confirming a new concept for on-site audits yesterday. Companies can avoid audits by seeking out possible signs of violations and correcting them independently. “Previously, the planning of on-site tax audits was a deeply confidential internal procedure of the tax organs,” the decree notes. Now audits will be conducted only after careful study of internal and external sources and the main target of audits will be companies “in relation to which tax organs have information on participation in schemes to evade tax payments or minimize tax obligations.”
The main innovation of the new concept is that “the taxpayer may take advantage of his right to assess his risk independently and can assess the advantage of independent revelation and correction of the error committed when calculating taxes.” Those who pay more to remedy past underpayments have less chance of being audited under the new concept.
There are 11 “criteria of risk” that a self-auditor can look for. They include paying below the industry average in taxes, reporting losses several tax periods in a row and showing greater expenses than income. Other signs that attract tax service attention include salaries below the regional average, unwarranted work with counteragents or intermediaries, frequent changes of location and a lower rate of profitability than “the rate of profitability in the given sphere of activity according to statistics.”
Ernst & Young partner Petr Medvedev stated that the main innovation in the criteria was their publication. He doubted the effectiveness of the new concept, however. “A company isn't likely to increase their tax expenses just because the tax service wants it,” he said. Sergey Shapovalov, general director of the Tax Help company, noted that the Federal Tax Service admits the punitive nature of auditing with the concept.
www.kommersant.com
All the Article in Russian as of May 31, 2007
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