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On the Issue of Effectiveness of Application of Certain Tax Incentives by Russian Enterprises

  • ECONOMIC POLICY
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Studies on Russian Economic Development Aims and scope

Abstract—

Taxation issues are traditionally extremely relevant. A big reason for that is that taxes are widely used as measures for stimulating economic growth and development. One of the most widely used yet controversial tax instruments is tax incentives. The article discusses some results of application of certain tax incentives by Russian enterprises and suggests measures to improve the effectiveness of such application. The article also discusses reasons that prevent companies from more productive use of preferential taxation.

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Notes

  1. Analytics portal of the Federal Tax Service of Russia. nalog.gov.ru.

  2. For details, see E. V. Ordynskaya, M. V. Cherkovets, and A. K. Moiseev, “The influence of direct and indirect taxation on household income levels,” Nauchn. Tr. Inst. Narodnokhoz. Prognozirovaniya Ross. Akad. Nauk (Moscow, 2022), pp. 242–265. doi 10.47711/2076-318-2022-242-265.

  3. According to analysts of the Federal Tax Service of Russia, “the increase in sales revenues indicated in the data of income tax returns is due to an increase in export revenues of organizations, mainly in the oil and gas and metallurgy sectors of the economy, as well as the recovery of consumer demand for goods and services” (Analytics portal of the Federal Tax Service of Russia. https://analytic.nalog.gov.ru/ (Date accessed: April 20, 2023)). However, it should be noted that the data of statistical tax reporting on form 5-P indicates that for the first nine months of 2022 the largest share of profits corresponded to nonsale revenues, rather than sales income. The total sales revenues of profitable and unprofitable organizations as of October 1, 2022, amounted to approximately 269 trillion rubles, while nonsale revenues for the same period were approximately 781 trillion rubles. Russian tax legislation defines nonsale revenues as such sources of profit as, for example, shareholder proceeds from other organizations, income from leasing property, received interest on loans and credits, profits resulting from a positive exchange rate difference, profits in the form of written-off payables, etc. A deeper understanding of the current patterns of corporate revenues requires additional research. See also: Chapter 25 of the Tax Code of the Russian Federation.

  4. Analytics portal of the Federal Tax Service of Russia. https://analytic.nalog.gov.ru.

  5. Analytics portal of the Federal Tax Service of Russia. https://analytic.nalog.gov.ru.

  6. The increased number of on-site tax audits indirectly indicates a tightening of tax administration. On-site tax audits are a mechanism that results in accrual of significant amounts of additional taxes and sanctions.

  7. Analytics portal of the Federal Tax Service of Russia. https://nalog.gov.ru/.

  8. Federal Law no. 67-FZ dated March 26, 2022 On Amendments to Parts I and II of the Tax Code of the Russian Federation, and Article 2 of the Federal Law On Amendments to Part II of the Tax Code of the Russian Federation.

  9. Analytics portal of the Federal Tax Service of Russia. https://nalog.gov.ru/.

  10. Analytics portal of the Federal Tax Service of Russia. https://nalog.gov.ru/.

  11. In this article, the term tax incentives is used to mean both tax incentives proper (see Article 56 of the Tax Code of the Russian Federation) and various preferences (exclusion from taxpayers list, full tax exemption, tax exemption of individual transactions, property, income, etc. or their exclusion from the list of taxable activities and assets, reduced tax rates, and tax deductions).

  12. Federal law no. 69-FZ dated April 1, 2020 (as amended on June 28, 2022) On Protection and Facilitation of Investments in the Russian Federation, article 25.18 of the Tax Code of the Russian Federation.

  13. See Article 259.3 of the Tax Code of the Russian Federation.

  14. See Article 259.3 of the Tax Code of the Russian Federation.

  15. See Article 264 of the Tax Code of the Russian Federation.

  16. Tax monitoring is a form of tax control in which an organization provides the tax authority online access to accounting and tax records. Correctness of tax calculations is controlled in real time. This type of tax control is available for taxpayers with annual tax contributions of at least 100 million rubles, annual income of at least 1 billion rubles, and assets value of at least 1 billion rubles (Article 105.26 of the Tax Code of the Russian Federation).

  17. Federal law no. 64-FZ date March 18, 2023.

  18. Ministry of Finance of the Russian Federation, official website. http://minfin.gov.ru/ru/press-center?id_4=38247-aleksei_-sazanov_predostavlennye_biznesu_nalogovye_lgoty_dolzhny_sposobstvovat_uvelicheniyu_investitsionnoi_aktivnosti_kompanii.

  19. According to data of statistical reporting form 5-P. Federal Tax Service of the Russian Federation, official website. www.nalog.gov.ru/rn77/related_activities/statistics_and_analytics/forms/.

  20. Investment tax deductions were introduced relatively recently; therefore, official data on the results of their application are only available for a few most recent tax periods.

  21. According to data of statistical reporting form 5-P. Federal Tax Service of the Russian Federation, official website. http://www.nalog.gov.ru/rn77/related_activities/statistics_-and_analytics/forms/.

  22. Due to the fact that according to Russian tax legislation the majority of corporate income tax revenues is directed to regional budgets.

  23. See also E. V. Ordynskaya, “Opportunities for transforming the tax system with adjustment for industry specifics," Nauchn. Tr. Inst. Narodnokhoz. Prognozirovaniya Ross. Akad. Nauk (Moscow, 2022), pp. 266–285.

  24. On data for November–December 2022.

  25. “…one of the enterprises reported that after several years of applying the incentive it received a notice of intentional tax evasion from the tax service” [4].

  26. Ministry of Finance of the Russian Federation, official website. http://minfin.gov.ru/ru/press-center?id_4=38247-aleksei_-sazanov_predostavlennye_biznesu_nalogovye_lgoty_dolzhny_sposobstvovat_uvelicheniyu_investitsionnoi_aktivnosti_kompanii.

  27. For details, see V. S. Panfilov and E. V. Ordynskaya, “Traditional and non-traditional aspects of tax incentives for investment activity,” Nauchn. Tr. Inst. Narodnokhoz. Prognozirovaniya Ross. Akad. Nauk (Moscow, 2015), pp. 93–114.

  28. See Chapter 25 of the Tax Code of the Russian Federation.

  29. See Chapter 25 of the Tax Code of the Russian Federation.

  30. The current standard rates of insurance contributions are as follows: for compulsory pension insurance, 22%; for compulsory social insurance for temporary disability and maternity, 2.9%; for compulsory medical insurance, 5.1%.

  31. Order of the Government of the Russian Federation no. 988 dated December 24, 2008 On Approval of the List of Research and Development Projects for which Taxpayer Expenses in accordance with paragraph 7 of Article 262 of Part II of the Tax Code of the Russian Federation are Included in other Expenses at Actual Cost with a Coefficient of 1.5.

  32. See Chapter 25 of the Tax Code of the Russian Federation.

  33. Here and further the values indicated in parentheses are for 2017, 2019, and 2021 in that order.

  34. For other countries, averaged data from Eurostat and national statistics services for different years in the 2014–2018 period, for Russia—data for 2020. See V. V. Vlasova, L. M. Gokhberg, G. A. Gracheva, et al., Indicators of Innovation Activity 2022: Statistics Digest (Higher School of Economics, Moscow, 2022) [in Russian].

  35. Here and further the values indicated in parentheses are for 2017, 2018, and 2021 in that order.

  36. Aleksei Sazanov: Tax incentives granted to businesses must contribute to an increase in the company’s investment activity, Ministry of Finance of the Russian Federation, official website, 2022. https://minfin.gov.ru/ru/press-center?id_4=38247-aleksei_sazanov_predostavlennye_biznesu_nalogovye_lgoty_dolzhny_sposobstvovat_uvelicheniyu_investitsionnoi_aktivnosti_kompanii.

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  1. Institute of Economic Forecasting, Russian Academy of Sciences, 117418, Moscow, Russia

    E. V. Ordynskaya & M. V. Cherkovets

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  1. E. V. Ordynskaya
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Translated by A. Ovchinnikova

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Ordynskaya, E.V., Cherkovets, M.V. On the Issue of Effectiveness of Application of Certain Tax Incentives by Russian Enterprises. Stud. Russ. Econ. Dev. 34, 583–591 (2023). https://doi.org/10.1134/S107570072305012X

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