NATALIA KORNIENKO, ELENA MININA: ON SUPPORTIVE MEASURES FOR TAX PAYERS GLOBALLY AND IN THE RUSSIAN FEDERATION
In connection with the COVID-19 pandemic, national governments, including Russia, are promptly taking measures to tax support their companies and individuals. A set of such measures includes delays in filing tax reports, rescheduling tax payments, suspending or simplifying tax audit procedures. International organizations conducting tax studies promptly issue advisory materials to support national tax systems.
In particular, on March 26, the OECD published a subject-oriented document “Tax Administration Responses to COVID-19: Measures Taken to Support Taxpayers,” which refers to measures taken by a number of countries. The authors promise that this information will be constantly updated and supplemented.
At this point, the OECD identifies the following series of measures:
1. More time to fulfil tax obligations, including:
1.1. increased reporting deadlines;
1.2. granting a deferral of tax payments;
1.3. abolition of fines and penalties;
1.4. simplified debt repayment (debt repayment plans, postponement of debt repayment);
2. Faster tax refund;
3. Temporary changes in audit policies and ways to ensure faster tax certainty;
4. Improvement of services to taxpayers and collaboration initiatives.
An extension of the deadlines for tax reporting and deferred tax liabilities have already been introduced in a number of countries or envisioned in the near future. In Belgium, for example, the deadline for filing income tax reports has been postponed from March 16 to April 30 as well as the deadline for VAT. Corresponding measures have been provided for in Australia, Brazil, Canada, China, Colombia, Israel, Ireland, Latvia, the USA, Czech Republic, Japan (the list of countries is non-exhaustive). However, such measures apply only to a part of taxpayers (taxes) in a number of countries, for example, in Canada and Brazil. In other countries, Czech Republic, for example, these measures embrace all taxpayers. It is noteworthy that extension of the deadlines for tax reporting and deferred tax liabilities became automatic in some countries, while in other countries taxpayers have to apply for this measure.
Abolition of fines and penalties. Many possible prescriptions to deal with this matter have been presented, i.e.: the abolition of fines and penalties can be relevant to certain taxes, it can be provided automatically or upon request, apply to all or part of taxpayers, act for a certain time or without limitation. Thus, for instance, the Australian Tax Service indicated that for enterprises affected by COVID-19, fines and penalties incurred from January23, 2020 will be abolished. Any affected taxpayer should apply for assistance, as these measures will not be implemented automatically.
Punitive sanctions related to any tax are not applied in Israel since March 17, 2020. In Spain, if medium –sized enterprises and self-employed individuals request tax deferment, interest will not be charged within the first three months. Similar measures have been introduced in Austria, Belgium, Great Britain, Georgia, Canada, the USA, Czech Republic, Finland, etc. in addition to already mentioned countries.
This measure, being a simplified procedure for debt repayment has already been used in a number of countries, and some of them suspend debt recovery, for example, Australia, Belgium, Canada, Finland, France, Hungary, Lithuania, Malaysia, the Netherlands and Great Britain (the list of countries is non-exhaustive).
Apart from the abovementioned measures, some countries launched a faster tax refund. In addition to faster processing of tax refund requests, tax authorities can consider easing the risk analysis conducted prior to refunding, for example, below approved thresholds, or when taxpayers have a good history of tax compliance. These countries include Australia, China, France, Ireland, Israel, Korea, Latvia, Lithuania and Malaysia. In particular, Ireland made it a priority to refund taxes to all taxpayers, and additional resources have been allocated to perform this activity.
Israel introduced a fast refund on income tax in the amount not exceeding Shekel 100 000. Larger amounts of refunds are subjected to the individual expertise, and guideline earmarked to accelerate this process has been issued for this purpose. Similarly, guideline aimed at faster VAT refund, has been issued in regard of every local tax authority.
It is being considered to launch an automatic cash refund of up to Shekel 35.000. At the same time, tax authorities most commonly accelerate the process of tax refunds that were not automatically exempted. The Malaysian Tax Service has switched to an automatic refund in no risk or low risk cases of illegal claim for a refund. Besides, an automatic refund to major enterprises is foreseen for the refunding amounts less than RM 1 million each (accounts for slightly less than RUB 18 million). Lithuania will refund VAT overpayment even without being requested so by taxpayers.
As for temporary amendments of the tax audit policy, this measure is relevant for a large number of countries.
These days, many countries introduce measures improving services provided to taxpayers and initiatives on better cooperation. Therewith, Russia can be a good example in these activities, as it is the undisputed leader in this area. More than 50 online services are available on nalog.ru and in mobile applications. The Federal Tax Service of Russia (FTS) is also accessible for telephone consultancy (and one can really get them on the phone!), and the website of the FTS of Russia provides detailed information on measures of the business support.
The RF Government and the FTS of Russia promptly developed and introduced measures to support taxpayers and currently, the following measures have been introduced:
The deadline for submitting accounting (financial) reporting statements for 2019 has been postponed for one week, until April 6, 2020, for every taxpayer without exception, including the filing of property tax declarations, and field tax audits are suspended as well as bankruptcy filings.
An extended list of tax support measures, apart from the abovementioned, has been provided for taxpayers belonging to the most affected sectors, including a deferment in tax payments, except for VAT and PIT) and insurance premiums for those included in the SME Register for a period of 6 months against 3 months for other relevant taxpayers.
The measures of debt collection have been suspended until May 1, 2020 only for those taxpayers included in the SME Register and related to the affected sectors. Decisions on suspension of operations on their accounts to ensure collection of debts, have also been postponed for registered SME entities, however, the deadline is not indicated, apparently, it will be decided at the discretion of the tax service.
Unlike the international experience, faster tax refunds are not expected for either legal entities or individuals in the Russian Federation. Taking into account the statistics of approved applications for a property or other tax deduction, the term of a desk audit can be reduced without affecting the budget, particularly in this area.
On the other hand, the burden on tax authorities has already increased and it may be difficult to implement this measure. Nevertheless, it is worth paying attention to the selective nature of Russian tax support measures and providing for the possibility of both expanding the list of affected industries later, and further adjusting the criteria for classifying taxpayers as affected, because the outcome of the crisis is not yet completely evident.
Natalia Kornienko, Head of Tax System Development Department;
Elena Minina, Senior Researcher. Tax System Development Department.
At this point, the OECD identifies the following series of measures:
1. More time to fulfil tax obligations, including:
1.1. increased reporting deadlines;
1.2. granting a deferral of tax payments;
1.3. abolition of fines and penalties;
1.4. simplified debt repayment (debt repayment plans, postponement of debt repayment);
2. Faster tax refund;
3. Temporary changes in audit policies and ways to ensure faster tax certainty;
4. Improvement of services to taxpayers and collaboration initiatives.
An extension of the deadlines for tax reporting and deferred tax liabilities have already been introduced in a number of countries or envisioned in the near future. In Belgium, for example, the deadline for filing income tax reports has been postponed from March 16 to April 30 as well as the deadline for VAT. Corresponding measures have been provided for in Australia, Brazil, Canada, China, Colombia, Israel, Ireland, Latvia, the USA, Czech Republic, Japan (the list of countries is non-exhaustive). However, such measures apply only to a part of taxpayers (taxes) in a number of countries, for example, in Canada and Brazil. In other countries, Czech Republic, for example, these measures embrace all taxpayers. It is noteworthy that extension of the deadlines for tax reporting and deferred tax liabilities became automatic in some countries, while in other countries taxpayers have to apply for this measure.
Abolition of fines and penalties. Many possible prescriptions to deal with this matter have been presented, i.e.: the abolition of fines and penalties can be relevant to certain taxes, it can be provided automatically or upon request, apply to all or part of taxpayers, act for a certain time or without limitation. Thus, for instance, the Australian Tax Service indicated that for enterprises affected by COVID-19, fines and penalties incurred from January23, 2020 will be abolished. Any affected taxpayer should apply for assistance, as these measures will not be implemented automatically.
Punitive sanctions related to any tax are not applied in Israel since March 17, 2020. In Spain, if medium –sized enterprises and self-employed individuals request tax deferment, interest will not be charged within the first three months. Similar measures have been introduced in Austria, Belgium, Great Britain, Georgia, Canada, the USA, Czech Republic, Finland, etc. in addition to already mentioned countries.
This measure, being a simplified procedure for debt repayment has already been used in a number of countries, and some of them suspend debt recovery, for example, Australia, Belgium, Canada, Finland, France, Hungary, Lithuania, Malaysia, the Netherlands and Great Britain (the list of countries is non-exhaustive).
Apart from the abovementioned measures, some countries launched a faster tax refund. In addition to faster processing of tax refund requests, tax authorities can consider easing the risk analysis conducted prior to refunding, for example, below approved thresholds, or when taxpayers have a good history of tax compliance. These countries include Australia, China, France, Ireland, Israel, Korea, Latvia, Lithuania and Malaysia. In particular, Ireland made it a priority to refund taxes to all taxpayers, and additional resources have been allocated to perform this activity.
Israel introduced a fast refund on income tax in the amount not exceeding Shekel 100 000. Larger amounts of refunds are subjected to the individual expertise, and guideline earmarked to accelerate this process has been issued for this purpose. Similarly, guideline aimed at faster VAT refund, has been issued in regard of every local tax authority.
It is being considered to launch an automatic cash refund of up to Shekel 35.000. At the same time, tax authorities most commonly accelerate the process of tax refunds that were not automatically exempted. The Malaysian Tax Service has switched to an automatic refund in no risk or low risk cases of illegal claim for a refund. Besides, an automatic refund to major enterprises is foreseen for the refunding amounts less than RM 1 million each (accounts for slightly less than RUB 18 million). Lithuania will refund VAT overpayment even without being requested so by taxpayers.
As for temporary amendments of the tax audit policy, this measure is relevant for a large number of countries.
These days, many countries introduce measures improving services provided to taxpayers and initiatives on better cooperation. Therewith, Russia can be a good example in these activities, as it is the undisputed leader in this area. More than 50 online services are available on nalog.ru and in mobile applications. The Federal Tax Service of Russia (FTS) is also accessible for telephone consultancy (and one can really get them on the phone!), and the website of the FTS of Russia provides detailed information on measures of the business support.
The RF Government and the FTS of Russia promptly developed and introduced measures to support taxpayers and currently, the following measures have been introduced:
The deadline for submitting accounting (financial) reporting statements for 2019 has been postponed for one week, until April 6, 2020, for every taxpayer without exception, including the filing of property tax declarations, and field tax audits are suspended as well as bankruptcy filings.
An extended list of tax support measures, apart from the abovementioned, has been provided for taxpayers belonging to the most affected sectors, including a deferment in tax payments, except for VAT and PIT) and insurance premiums for those included in the SME Register for a period of 6 months against 3 months for other relevant taxpayers.
The measures of debt collection have been suspended until May 1, 2020 only for those taxpayers included in the SME Register and related to the affected sectors. Decisions on suspension of operations on their accounts to ensure collection of debts, have also been postponed for registered SME entities, however, the deadline is not indicated, apparently, it will be decided at the discretion of the tax service.
Unlike the international experience, faster tax refunds are not expected for either legal entities or individuals in the Russian Federation. Taking into account the statistics of approved applications for a property or other tax deduction, the term of a desk audit can be reduced without affecting the budget, particularly in this area.
On the other hand, the burden on tax authorities has already increased and it may be difficult to implement this measure. Nevertheless, it is worth paying attention to the selective nature of Russian tax support measures and providing for the possibility of both expanding the list of affected industries later, and further adjusting the criteria for classifying taxpayers as affected, because the outcome of the crisis is not yet completely evident.
Natalia Kornienko, Head of Tax System Development Department;
Elena Minina, Senior Researcher. Tax System Development Department.