A very interesting article on tax administration has been recently published but it does not take into account modern trends. In recent years, the tax authorities have developed more condoning attitude towards violations by taxpayers, even though the lion's share of the so-called small businesses is created for the sole purpose of profiting at the expense of the state.
This, in fact, follows from the enormous number of court cases in tax disputes, where the presence of schemes is not just declared, but clearly proven. Those “new tax regimes” and experiments, carried out by the Tax Service, are just aimed at simplification of tax administration.
Most of the examples cited in the article demonstrate the intention of entrepreneurs to transfer their entrepreneurial risks to the state.
For example, a lot is said about unscrupulous counterparties and the presentation of claims to the last enterprise in the chain. On the one hand, this may seem like bringing an “innocent” person to justice, but on the other hand, one may wonder if checking the counterparty is not a standard part of economic activity. Wouldn't a regular farmer, for example, engage a company for harvesting that doesn't know how to work with certain types of products? Even the average shopper in a store will often check the expiration date of a product before buying it. Or is this also an excessive burden on him?
Understandably, there are legal requirements, and we proceed from the presumption of good faith, but if you saw a stale product and bought it not informing the manager or writing a complaint to the store, most would say that you are to blame for your own poisoning. Why do we take a different approach with entrepreneurs?
Examples of tax systems of foreign countries do not stand up to competition at all. For example, VAT was introduced specifically in the same UAE and not so long ago, which rather confirms the effectiveness and necessity of this tax. The absence of VAT in the U.S. is explained not by any negative impact of this tax on business, but by the peculiarities of the law and the impossibility of introducing VAT at the federal level (by virtue of the last Article 1 of the U.S. Constitution).
In most countries, the obligation to pay VAT may arise in connection with the shipment of goods, i.e. before payment of the shipped goods. Thus, the situation of the seller paying VAT before receiving the proceeds is common practice in the world.
By no means do I want to argue with the thesis that taxpayers should know where and how their taxes are spent but all over the world everyone is trying to relieve the taxpayer as much as possible from filling out tax returns.
According to the author, the main problem of enterprises lies in the tax system, and not in the fact that they do not conduct business activities efficiently, do not look for ways to legally optimize costs (for example, by hiring one more qualified employee instead of two low-skilled) and do not produce products of such quality that there is demand for it.
Proposals to reduce taxes or change the way they are levied (abolition of the advance method) do deserve attention but it is also important not to take things too far. The taxes that go into the budget, among other things, ensure the social needs of citizens such as free medicine, hospitals, and social benefits but they do not exist in some “developed” countries where all this is achieved at the expense of budget funds. Are ordinary citizens ready to give up these privileges to support inefficient entrepreneurs?
Speaking of specific proposals, the following can be noted:
1. The enterprise should be profitable.
The profitability of an enterprise should be achieved through the efficiency of entrepreneurial activity but not through the tax system. Entrepreneurial activity is a risky activity. Reducing risk through the tax system puts entrepreneurs in the position of “employees” of the state, which is contrary to the essence of doing business. Certain industries are already provided with tax incentives, aimed at improving the performance of businesses in the industries.
2. Unfortunately, this is utopia that paying taxes should be more profitable than schemes. Schemes are inevitable in any system, and the existence of criminal cases of tax evasion in developed countries is proof of that. Moreover, the so called VAT gap is one of the biggest problems in the EU economy. However, it is possible to reduce the number of “evaders” at the expense of tax administration mechanisms, which are already implemented in Russia (for example, automatic reconciliation of invoices, traceability and labeling mechanisms).
3. The Federal Tax Service's indicators should be sharpened for joint purposes with business. This program is already being implemented but the thing is that business, which sees the state as the enemy, prefers not to notice it.
4. Stimulation of existing companies, including at the expense of tax incentives. The duration of operation of the enterprise, as mentioned above, should be provided by its efficiency and market requirements, rather than by tax mechanisms. The availability of benefits for newly established enterprises is aimed at minimizing the loss at the stage of formation of the enterprise and determining the further expediency of this or that type of activity.