Measures to reduce tax risks for business

Dec, 17 2019

One of the most important hurdles for expansion of business activity in Russia is the criminal liability for currency and tax violations. To improve investment environment in Russia, Russian agencies propose measures to decrease tax burden for the business.

In particular, the liberalization of the Criminal Code of the Russian Federation (hereinafter – the Criminal Code of the Russian Federation) was discussed at the meeting of representatives of ministries and the President. It was proposed to amend or completely abolish criminal articles establishing liability for currency and tax violations as one of liberalization measures.

Thus, among the measures providing tax burden decrease for the business, the most significant are the following:

1) The abolition of «currency» articles of the Criminal Code. The corresponding bill was introduced by the Ministry of Finance. It is assumed that these changes will reduce the risks of criminal prosecution of entrepreneurs due to non-return of funds; 2) The abolition of article 210 of the Criminal Code, providing criminal punishment for organizing of a criminal community or participating in such community – the most dangerous article for business;

However, at this stage, only the decrease of tax burden can be a real option for tax liberalization. To date, only a decision for legislative increase of tax arrears amount, which is an object of criminal liability, has been made. At the same time, the form of changes and specific amounts are not determined yet.

It should be mentioned that large businesses most affected by low tax arrears: the total amount of taxes for large companies exceeds billions of rubles, and arrears of several million can lead to criminal liability.

Given the worsening of business environment in Russia, the availability of criminal articles for tax and currency violations, as well as the low efficiency of property protection, the risk of not only the lack of growth in foreign investments to Russia, but also its reduction, is becoming ever more real. In addition, the possibility of criminal prosecution for non-receipt of foreign exchange earnings often stops companies from entering foreign markets.

It is expected that full or partial adoption of measures in legislative liberalization in the sphere of foreign exchange, as well as increasing the efficiency of judicial system, will be able to increase the attractiveness of investment environment in Russia