УДК 336.2

INTERNATIONAL AND RUSSIAN PRINCIPLES OF TAXATION IN CONNECTION

P.V. Suntseva

Perm State National Research University
15, Bukirev st., Perm, 614990
E-mail: Этот адрес электронной почты защищен от спам-ботов. У вас должен быть включен JavaScript для просмотра.

 

The aims of this article are doing useful research for foreign investors and Russian exporters how they should pay taxes in Russia and abroad (e. g. in European community) and trying to find the difference between international and Russian ways of collecting taxes (taxation) in its general rules – principles.

The fourth part of 15-th article Constitution of Russian Federation (RF) is provided positive guarantee for foreign investors and Russian exporters: “Generally recognized principles and provisions of International Law, and the RF’s international treaties are the part of the Law system of Russian Federation. The rules declared by National Law are always overruled by the rules of international treaty”[1].

The only one legally embodied Tax Law in Russia is Tax Code of the Russian Federation which was adopted by Russian State’s Duma on July 16, 1998[4]. Also Russia ratified bilateral treaties to avoid double taxation with some countries: France, Belgium, Cyprus, Ukraine, Turkey, Great Britain, Switzerland, Czech Republic, Finland, Kazakhstan, Kuwait, Tajikistan, Algeria.

International principles of taxation

Russian principles of taxation

Roy Rohaty’s issue “Basic international taxation” is the main source for this comparative analysis[3, Volume 1, 456 p.].

The 3-rd article of Tax Code Russian Federation is the second source for this comparative analysis.

1. Equity and fairness:

- inter-individual equity means that this principle requires equal taxation on taxpayers with equal income (“horizontal equity”) and the levy of progressive higher taxation on higher income (“vertical equity”).

 

1. The same principle in Russian Tax Law named “Non-discrimination” which claimed in the second point of the higher mentioned third article. But the main distinction between two principles “Equity and fairness” and “Non-discrimination” are supporting only “horizontal equity” of taxpayers in Russian tax law. Unfortunately there is the same rate of fiscal burden – e.g. 13 per cent for every citizen despite of the level of taxpayer’s income, the general rate of VAT is 18 per cent and ect.

The sources of international taxation rules are OECD (Organization for economic Co-operation and Development) Modal Tax Convention (MC) – OECD MC[2], United Nations Modal Tax Convention – UN MC[6], their legal Commentaries and Vienna Convention rules of interpretation international treaties [5]. OECD and UN Modal Conventions are generally used by some recommendations of international organizations, but the VCLT is legally used for interpretation of the tax treaties over the world (especially in member-states).

VCLT is ratified and applicable in Russia. Unfortunately it contents only general rules of double and International treaties coming into force, application and connection their provisions with National Law norms.

The OECD MC and the UN MC include special norms and principles of taxation. But the OECD MC and the UN MC are not applicable in Russia. There are no official Russian translations and local commentaries.

It should be mentioned unfortunately Russian Taxation System haven’t yet integrated in the World Taxation System.

So, INTERNATIONAL AND RUSSIAN PRINCIPLES OF TAXATION IN CONECTION looks like that. Look at the explanations in the table below.

International principles of taxation

Russian principles of taxation

2. Neutrality and efficiency:

– refers the relationship between the taxpayer and the State,

– estates the equity of foreign and native taxpayers (or import and export flows of investments).

 

2. The same principle in Russian Tax Law is “Legality principle: everybody must pay only legally levied taxes and dues”. It is claimed in the first point of the higher mentioned third article. This principle also refers the relationship between the taxpayer and the State and additionally with its parts (“subjects” in the RF), but in international taxation illegally levied taxes are not admitted at all.

Russian Federation is the biggest in the world federation country. So when some subject of the RF levying its local taxes it have to obey general principles of federal taxation policy, which had been mentioned before in Tax Code.

3. Promotion of mutual economic relations, trade and investment.

– It would be an ideal model of taxation, when the person at the same time of choosing the way of trading or doing business shouldn’t think about difference of tax burdens in different states. So the economic choice of free international business subject shouldn’t be influenced by the tax minimization/reduction reason.

– Sometimes investors prefer turn the money stream to offshore's jurisdictions because of low taxes. And developed states loose a lot of investments and money derived from the source in these states.

3. The same principle is fixed in the 4-th point of the 3-rd article of Tax Code RF. It is “The safety of the one integrated economical area in Russia, free flows of goods (works and services) and financial instruments and prevention of making any impediments to free legally valued economical activity of citizens and legal entities”.

This principle refers the integration of the markets of all subjects in the Russian Federation on the whole territory. It declares the equity of economic and territory areas in Russia.

4. Prevention of fiscal evasion.

– Tax avoidance.

– Double non-taxation is not tax evasion if it is provided by a tax treaty or mutual agreement.

– But unfortunately there is no international tax responsibility institute to prevent tax evasion and there are also no International tax police. So sometimes criminals hide their profit in amicable jurisdiction without any bad consequences of their illegal activities.

 

4. The same idea is claimed in the 3-rd article of Tax Code RF, e.g. everybody has to pay legally levied taxes and dues. We can figure out the idea of this principle from the tax responsibility institute. The measures of Prevention of fiscal evasion in Russia are really severe. The fines could be the same size like commercial profit derived from illegal source. There are also taxpayer’s administrative and criminal responsibility fixed in Russian Administrative and Criminal Codes.

But the presumption of taxpayers good faith (innocence) is always must be taken into account by courts and other state authorities in case there are unavoidable doubts whether the taxpayer is guilty or innocent.

5. Reciprocity.

– The limitation of full rights to tax of one state in case of the same limitation is provided by the other tax jurisdiction.

– The main goal is prevention of double taxation.

– In model conventions the source State has the first opportunity to tax non-residents. The residence state should grant relief in case the double taxation arises.

5. Frankly speaking, you there is no one State which shares its tax interests with another state equally. Russian Federation is not exception from this general rule.

There are some treaties signed by our State provided prevention of double taxation.

The both source and residence criteries are taken into account in Russia. All russian residents and all subjects who get money from the source in Russia have to pay taxes in Russia. Only if there is double treaty between source-State and RF and there are documents by which the taxpayer could prove tax costs had been already paid or would be paid abroad the taxpayer could be excluded from double taxation.

6. We think we should add one more principle to this column – Prevention of double taxation. It’s the main goal of International tax law and international co-operation in this area. All of the international multilateral and bilateral treaties were negotiated to provide free flows of capital without any tax difficulties.

6. We couldn’t forget to mention specific principles of Russian Tax law:

– economic reason for each tax,

– the clear definition of each tax and every its elements (the subject, the object, the tax base, the tax rate, the type of income which is taxed and etc.).

The Summary of the table:

International Tax Law is also called “compromise law”, because its subjects – mainly States (additional international organizations and international over-governmental, over-national structures) are equal and they should take into account each other interests.

In Russian National Tax Law system our state is only one powerful subject. The taxpayer is the weakest part of tax-paying relations. That’s why the provisions of Tax Code RF are mainly taxpayer’s wrights protecting (e. g. the presumption of taxpayer’s good faith, no retroactive effect of the proactive for taxpayer’s law). Because of the biggest territory in the world and a great number of fiscal needs (such as social support of Russian citizens, supporting of small national groups whose economies are not developed, great economic disproportion between developed and developing subjects of the RF) even keeping the same rate and the same number of taxes on the whole country’s territory is quite difficult task.

 

The bibliographic list

  1. The Constitution of Russian Federation. 12, December 1993 // Russian paper. 2009. 7.

  2. OECD Model Tax Convention: Introduction and Commentaries from Roy Rohaty. Basic international taxation. Second edition. Volume I: Principles. Published by: Richmond Law & Tax Ltd: 2005. P. 112142.

  3. Roy Rohaty. Basic international taxation. Second edition. Volume I: Principles. Published by: Richmond Law & Tax Ltd: 2005. 456 p.

  4. Tax Code of Russian Federation part 1was adopted by Russian State’s Duma on July 16, 1998 N 146-FL. Reduction from 26.11.2008. // Collection of Laws RF. 1998. 31. P. 3824.

  5. Vienna Convention on the Law of Treaties (VCLT) was adopted on May 22, 1969 and entered into force on January 27, 1980. from Roy Rohaty. Basic international taxation. Second edition. Volume I: Principles. Published by: Richmond Law & Tax Ltd: 2005. P. 6587.

  6. UN Model Tax Convention: Introduction and Commentaries from Roy Rohaty. Basic international taxation. Second edition. Volume I: Principles. Published by: Richmond Law & Tax Ltd: 2005. P. 162181.

 


      

      

 
Пермский Государственный Университет
614990, г. Пермь, ул. Букирева, 15
+7 (342) 2 396 275, +7 963 012 6422
vesturn@yandex.ru
ISSN 1995-4190
(с) Редакционная коллегия, 2011
Выходит 4 раза в год.
Журнал зарегистрирован в Федеральной службе по надзору в сфере связи и массовых коммуникаций.
Свид. о регистрации средства массовой информации ПИ № ФС77-33087 от 5 сентября 2008 г.
Перерегистрирован в связи со сменой наименования учредителя.
Свид. о регистрации средства массовой информации ПИ № ФС77-53189 от 14 марта 2013 г.

С 19.02.2010 года Журнал включен в Перечень ВАК и в РИНЦ (Российский индекс научного цитирования)

Учредитель: Государственное образовательное учреждение высшего профессионального образования
Пермский государственный национальный исследовательский университет”.