Tax Monitoring: Outcomes Seven Years on, and the Future Outlook

Key conclusions

Tax monitoring proves efficient, the number of participants is growing constantly

“In 2022 we have 339 companies taking part in tax monitoring. <...> We grew a lot: in the last two years, during the pandemic, we added more than two hundred participants. What does this figure show? Probably it underscores the fact that... tax monitoring without desk and field audits is a more stable form of tax control. It is more convenient for taxpayers, since it has already incorporated the principles of remote interaction, and online control. <...> We expect a large increase in a number of participants this year,” Marina Krasheninnikova, Head of Tax Monitoring Directorate, Federal Tax Service of Russia.

“In fact, it is a total must. We have to be doing this. <...> Our tax monitoring experience goes back to 2019... now we have about 36 organizations in monitoring, and by 2025 the total number of those that will switch to this form of tax control will exceed 100. Over 130 organizations will be in tax monitoring, it is over 70% of all taxes that are paid today by a consolidated group of taxpayers,” Karen Oganesyan, Head of 822 Department, Gazprom.

“As part of this relationship with the tax authority, we have reached the maximum level of confidence in each other. It is highly effective because at any time we can come to the tax authority to ask a question and get an answer. <...> This is a comfortable space in which we can make decisions and understand that the tax authority is aware of this or that our question, and, accordingly, predict further actions,” Olga Emelyanova, Head of Tax Law Department, Inter RAO.

Tax monitoring stimulates taxpaying companies

“What we strive for is to obtain a single information space and work with statistical tax data in that space. <...> We created our domestic product called Data Showcase. It is a fully import-substituted Russian product, which my colleagues and I ... are successfully implementing. We took a certain risk, because we understood that it would be a product that is developed from scratch, but it was justified. Today, companies are working in this information management system, and there are no complaints, at least on the part of the Federal Tax Service,” Karen Oganesyan, Head of 822 Department, Gazprom.

“Any changes, including regulatory ones, should be considered as opportunities for development: development of tax accounting processes, tax reporting, internal control, and the development of the tax function in general. So, when the company sees tax monitoring as an opportunity for development – this is the most important preparatory stage, when you go and join tax monitoring. If you even force yourself to look at it from a different angle and do not see such an opportunity, my subjective opinion is that you should not join tax monitoring yet,” Anton Radaev, Head of the Department for Coordination and Development of the Tax Function, Sberbank.

PROBLEMS

Taxpayers cannot keep up with Federal Tax Service demands, which leads to additional costs

“We are seeing a certain complication of all these processes. The Federal Tax Service as the flagship in the field of digitalization, they are riding the most advanced technology, and we are trying to keep up with them. It is difficult, it is costly, but we are trying to keep up with the high demands that the Federal Tax Service has. I hope that the period of such growth will stabilize, and we will implement all these requirements more systematically,” Karen Oganesyan, Head of 822 Department, Gazprom.

“Change motivates companies to alter internal processes, adapt systems and refine them... It would be more comfortable if we had a more detailed development plan so that companies could plan and adapt at their level - both labour and financial, pass internal approvals... A more detailed plan would allow us to plan our workload, get funding and meet tax authority requirements on time... We do not want to build interim solutions, we want to make a beautiful finished product,” Anna Goncharova, Head of Tax Administration, Tax Department, Norilsk Nickel.

Reasoned opinions are in demand with the taxpayers but should be applied carefully

“Reasoned opinion is a tool available only within the tax monitoring. <...> This is a point tool that must be applied very carefully. <...> We carefully monitor the statistics every year ... and more than 70% are requests of motivated opinion. That is those that we make at the initiative of taxpayers,” Marina Krasheninnikova, Head of Tax Monitoring Directorate, Federal Tax Service of Russia.

“We have repeatedly asked the tax authority to create a single database of already issued reasoned opinions. I believe that this is a necessary and very important point, a kind of information field for all taxpayers who are in tax monitoring. We badly need this information, particularly what the other major taxpayers are doing in this part. Yes, of course, there is an issue of confidentiality of much of this information, but at least some legal data should probably reach us,” Olga Emelyanova, Head of Tax Law Department, Inter RAO.

SOLUTION

Automation of tax monitoring should lead to improved data quality and simplified tax reporting

“By and large, the requirements that have been articulated are the tip of the iceberg of the entire internal control system. <...> This iceberg is huge at the bottom, and it is aimed at ensuring that there is confidence in the quality of data and in the processes in which this data is generated. Automation should aim to provide confidence in the quality of the data and in the process itself,” Andrey Chernenko, B2G Director, VK Digital Technologies

“In the situation when tax legislation changes at least twice a year, it is impossible, in my opinion, to create such detailed algorithms. You will need to constantly change them, let alone digitize and automate. <...> Here it can be a question of either digital detailing or the issue of tax reform, simplification of the tax system in general,” Olga Emelyanova, Head of Tax Law Department, Inter RAO.

“I hope that tax monitoring will fulfil one of its main functions: reducing the administrative burden. And if indeed our accounting and financial services will feel this effect, that really we move away from these tons of paper documents and save time by automating processes... this will be the effect that we expect from tax monitoring,” Karen Oganesyan, Head of 822 Department, Gazprom.

For more information, visit the Roscongress Foundation’s Information and Analytical System at roscongress.org

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