Entrepreneurs and officials are eyeing a future tax amnesty
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The president’s order to work out the parameters of an amnesty for businesses using splitting schemes has intensified the discussion around this method of tax optimization. A meeting of the tax expert council of the Chamber of Commerce and Industry (CCI) held on Tuesday showed that neither the authorities nor the business itself has a clear understanding of the fragmentation criteria that business associations insist on being legislated. Nevertheless, some wishes of entrepreneurs for a future amnesty are already ready. This is, first of all, a mechanism for businesses to independently disclose splitting schemes, a moratorium on criminal prosecution for tax evasion, and the retrospective nature of the amnesty.
The promise of amnesty for businesses using splitting schemes to reduce taxes, made in the President’s address to the Federal Assembly, became one of the topics of the meeting of the Chamber of Commerce and Industry’s expert council on improving tax legislation and law enforcement practice held on Tuesday.
The conversation first of all turned to the problem of the lack of legislative designation of crushing criteria. Business associations regularly complain about the lack of clear rules of the game in this area (see Kommersant, February 29). The Chamber of Commerce and Industry so far cites two signs of malicious intent during fragmentation: the presence of a single controlling person in the group of companies thus formed and a type of activity that is confusingly similar.
The head of the legal department of the Federal Tax Service, Vitaly Zvankov, who participated in the meeting, made it clear that the topic of fragmentation is at the discussion stage and the proposals will be worked out by the Chamber of Commerce and Industry. At the same time, conceptually, the Federal Tax Service agrees with the importance of abandoning evaluation criteria during inspections, which are de facto applied now.
Deputy Director of the Department of Legislative Activities of the Chamber of Commerce and Industry Alexander Selivanov for the first time publicly outlined the chamber’s position on the topic of amnesty. Among the wishes is the launch of a mechanism that would allow tax authorities to be notified about doing business in a group, indicating the types of activities and degree of affiliation, that is, we are talking about voluntary disclosure of the splitting scheme. The TPP suggests giving such companies time to restructure.
Another wish of business is the introduction of a moratorium on prosecution under articles of the Criminal Code on tax evasion, as well as limiting the application of Article 159 of the Code of Fraud to it. The latter, Mr. Selivanov explained, is due to the fact that law enforcement agencies often blame it on entrepreneurs when the amount of damage is not enough to initiate a tax case.
In general, business hopes that the nature of the amnesty provisions will be retrospective, that is, the amnesty will be extended to companies that, by the time of its introduction, have already been audited by the tax authorities, but have not yet been held accountable. Entrepreneurs also propose creating a special service on the Federal Tax Service website that will allow companies to be checked for signs of fragmentation.
Partner of the consulting company B1 Marina Belyakova notes the importance of the proposals, especially in terms of applying the articles of the Criminal Code to business. “The line between illegal fragmentation and reasonable distribution of operations among different companies is still quite thin, and criminal liability is the biggest threat,” says the expert. Tax consultant Vadim Zaripov agrees with this. In his opinion, it is advisable for a business that has already been inspected, but has not yet received a penalty, to “write off fines, stop criminal prosecution, reduce penalties and provide a deferment.” Senior tax consultant at Tax Compliance Ivan Tsvetkov notes that the Chamber of Commerce and Industry’s proposals “reflect the general wishes of taxpayers,” but need to be improved. According to him, in addition to the very essence of the amnesty, the conditions under which the taxpayer can qualify for it are also important. This is, for example, the total threshold of damage to the budget from a specific case of fragmentation.
Convenient, but unsafe
MEF Legal lawyer Andrey Chugunov notes: in general, business proposals can influence the improvement of the business climate. Thus, he explains, the introduction of a moratorium on criminal prosecution for tax crimes related to fragmentation “can have a positive impact on the situation of unfounded criminal prosecution of entrepreneurs and reduce criminal pressure on small and medium-sized businesses.” In addition, Andrey Chugunov says, given the fact that claims for “fragmentation” are usually made against small businesses, the introduction of a notification procedure can reduce the administrative burden on SMEs.
Sergei Zhestkov, partner and head of the tax law practice at Melling, Voitishkin and Partners, doubts that disclosing affiliation “in advance” will help avoid problems with the tax authorities – “more likely, on the contrary, there will be increased attention during audits.” In addition, he says, it is not yet clear to what extent such information should be provided so that the tax authorities understand how to use it. “It is possible that the process will become bureaucratic and instead of making life easier, taxpayers will have to prepare and submit a lot of documents and information to the tax authorities,” he says.
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