Building of the Russian Ministry of Justice department of the Federal Registration Service for Moscow and Federal Tax Service of Russia department of Federal Tax Service for Moscow
Photo: Dmitry Kostyukov
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Taxation – Direct and Indirect
The KPMG company's annual tax policy review was published yesterday. This year, it includes data on indirect taxation. It has included calculations of corporate taxes (tax on the income of legal entities in Russia) since 1993. Company analysts compared those taxes with another category of tax – indirect taxes (in Russia, the main indirect tax is VAT, which is close to the other form found in the world, GST, or “goods and services tax”). The analysts conclude that a tendency is emerging in the world for corporate taxes to fall steadily, with VAT/GST gradually compensating for them.
Falling profits taxes have been the norm in the world for several years. They have almost been halved in the last 14 years. The European Union is the low profits tax leader. It was an average of 24.2 percent in the EU in 2007, compared to 28 percent in Latin America and 30.1 percent in the Asia-Pacific. The EU also leads in indirect taxes. The average VAT/GST there is 19.5 percent, compared to 14.2 percent in Latin America and 10.8 in the Asia-Pacific.
This casts the issue of lowering Russia's VAT in an interesting light. It indicates that Russia's 18-percent VAT and 24-percent profits tax are in line with European averages. In the Russian Union of Entrepreneurs and Industrialists' demands to lower the VAT to 13 percent, compensation through taxation of profits is never mentioned. Thus, the reform as it is proposed really does look like tax reduction that would allow Russia to compete with the rest of the world in tax regime.
www.kommersant.com
All the Article in Russian as of July 27, 2007
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