MOSCOW. (RIA Novosti economic commentator Mikhail Khmelev) - Russia's tax amnesty has gotten off to an unimpressive start.
The measure, which allows individuals to file a simplified income tax return between March 1, 2007 and January 1, 2008 for income since 2001 on which they have not paid taxes, has not been used by many people.
According to the federal treasury, only some 100 Russians used the procedure in March, adding 57 million rubles ($1.6 million euros) to the treasury. This is a disappointing result, although officials claim that replenishing the budget is not the main goal of the campaign. Rather, the amnesty was designed to show businessmen that the period of lax tax collection is drawing to a close.
Those who choose to pay back taxes do not need to prove that their incomes were obtained legally, and they can pay taxes on any amount they wish to declare. They should transfer taxes equaling 13% of the undeclared income to the treasury's account through any Russian bank. Then, they only need to present the invoice to tax inspectors.
The state has promised them anonymity, saying that information from the declaration payment invoices will not be forwarded to tax agencies. To convince skeptics, it will amend the payment documents soon to ensure the complete anonymity of payers.
Tax agencies will not prosecute evaders during the amnesty period, but are very likely to clamp down on them after January 1, 2008. They are setting up departments to collect data about private operators, owners of multiple pieces of real estate, and those who declare modest incomes but make large purchases. After the end of the leniency period, Russian authorities may toughen legislation on tax evasion.
So, who is advised to use the amnesty? Under the law, tax agencies may check the incomes and tax payments of Russian citizens over the past three years. When they begin the campaign against tax evaders in 2008, they will be able to present claims only for 2005-2007. Therefore, tax evaders need to pay only their 2005 arrears (Russians who have decided to go straight will presumably pay taxes for 2006).
Russian law provides for a fine amounting to 20% of taxes owed, up to a maximum of 100,000 rubles (2,900 euros). With an income tax of 13% in Russia, this puts the corresponding amount of undeclared income at 769,000 rubles (22,350 euros). Those who do not declare larger incomes may face criminal charges and should therefore use the tax amnesty. The period of the statute of limitations can be prolonged to 6-10 years for businessmen charged with tax evasion. So, major tax evaders should pay up for the said period.
People who have already been charged with tax evasion may use the amnesty "to clear their conscience" before the court passes a verdict. The number of cases opened by tax agencies against individual evaders went up by 58% last year. Only 20% of these cases reached the courts, and sentences were passed only on 1,036 defendants (75% of the total).
In addition, those who have not paid the real estate sales tax (provided the resulting income was not covered by the property-related tax deduction) should also use the amnesty. Flat owners who lease their flats, gypsy cab drivers and private tutors, as well as those who get paid under the counter should take advantage of the opportunity.
The amnesty will also benefit businessmen who use the traditional taxation system, as they will have to pay only one 13% tax instead of two taxes - the Unified Social Tax and the Personal Income Tax.
The hopes pinned on the tax amnesty, however, have not yet been justified. The largest number of payers was registered in Moscow, where 33 people transferred to the treasury's accounts some 18 million rubles (520,000 euros) in March. Some jokers paid laughable taxes of 100-500 rubles, probably to see the look on the faces of the tax agents. In most regions, nobody owned up to having undeclared incomes.
The authorities have not yet explained some provisions of the new procedure for declaring incomes. For example, those who pay their tax debts to the state will be absolved of the sin of evasion. But will they be prosecuted for failure to pay up on time? And what punishment will be devised for companies that pay their staff under the table?
The explanations may be provided later on, as there is still some time left until the end of 2007. Anyway, those who do not want to live in fear of a prison term should use the chance to declare their incomes now.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
