Russian Prime Minister Dimitry Medvedev recently gave an important interview to one of the Russian major television channels.
He was largely discussing foreign investment following a meeting of the Foreign Investment Advisory Council. He had reason to celebrate. Russia has moved up the World Bank's Ease of Doing Business rankings to 28th place.
Key point he wanted to make was that investors, particularly foreign investors, prefer stable tax regimes. Once the tax rate has been set, it should not be varied without notice and it should not be varied often.
This should be considered in the light of Russia's revolutionary VAT collection scheme. Russia is already a world leader in e-commerce due to its use of electronic trading platforms for state tenders. It has acquired another first-place with VAT. Every invoice issued by a VAT registered business is now instantly transmitted to the federal tax service data centre. When the VAT chain ends at retail level, the cash registers of retailers are also connected to the federal tax service data centre. No business in Russia needs to do a VAT return any more. Fraud has dropped from a level of 20% to 1%. For comparison in the UK VAT fraud is thought to run at the level of 9%. The reform was achieved by placing a computer scientist in charge of tax collection rather than an accountant.
He was largely discussing foreign investment following a meeting of the Foreign Investment Advisory Council. He had reason to celebrate. Russia has moved up the World Bank's Ease of Doing Business rankings to 28th place.
Key point he wanted to make was that investors, particularly foreign investors, prefer stable tax regimes. Once the tax rate has been set, it should not be varied without notice and it should not be varied often.
This should be considered in the light of Russia's revolutionary VAT collection scheme. Russia is already a world leader in e-commerce due to its use of electronic trading platforms for state tenders. It has acquired another first-place with VAT. Every invoice issued by a VAT registered business is now instantly transmitted to the federal tax service data centre. When the VAT chain ends at retail level, the cash registers of retailers are also connected to the federal tax service data centre. No business in Russia needs to do a VAT return any more. Fraud has dropped from a level of 20% to 1%. For comparison in the UK VAT fraud is thought to run at the level of 9%. The reform was achieved by placing a computer scientist in charge of tax collection rather than an accountant.
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