Key facts about tax system in Russia

The tax system of the Russian Federation is the main tool for development of centralized money funds required for the follow-on financing of all directions of national activity. It allows accumulating enough resources in the federal, local and regional budget and using them for national development.

The formation and development of the tax system of the Russian Federation, in brief

The prototype of the government financial system dates back from the early years of Old Rus, in the ⅠⅩ century. Initially, as the fundamental assembly was homage, it was then replaced by passing from each pipe and furnace with smoke duty. At the time of the Tatar-Mongol attacks the level of citizens burdening had reached a historic high, because, apart from addressing municipal targets, it was required to give substantial funds to Mongolian khans. Commonly the payment was taken place directly in kind to the representatives of the Tatar-Mongol aristocracy.
Many innovations in the government finance system were made by Peter Ⅰ. Namely during his governing new types of compulsory payments, including per capita tax and tax for beards, were appeared. A significant event was the emergence of the institute of profiteers, who had already assumed the responsibility for administration and control over the gathering money to the treasury. It was the moment of creation of the fiscal authorities, which eventually led to forming an entire separate institute of tax officials.

The significant complication of the tax system happened after the abolition of serfdom in 1861. As the basis for taxation have become to serve:

  • acres;
  • income from the use of housing.​
First there were appeared excise taxes on alcohol, tobacco, and also customs payments began to gather. The whole system started to move toward increasing complicating.
During the post-revolution period, namely after 1921, all taxes, which excited in czarist days, were actually returned under the slogans of the new economic policy. There was fixed an additional fee from wealthy households. All along 1930 — 1932 excise taxes were cancelled, while most organizations began to pay receipts and profit taxes. Already then the main directions of the future development of fiscal policy have begun to emerge.

The Second World War was required great concentration of financial resources in state hands, the general militarization of the economy resulted to usage of additional types of fiscal payments. Notably, for the first time there were fees:

  • from unmarried men;
  • from citizens without families.
The objectives in so doing were readily understandable: to increase the fertility rate and to solve the demographic problem in the long term. In fact, the assigned objectives, as is known, were eventually resolved. Funny thing is that the payment from unmarried men was levied right up to 1990, and only then was cancelled.

The structure of the Russian tax system began to come to modern form only after the events of 1990. The initiating a process of its formation was launched by publication of the law of the Russian Federation "About the fundamental of the Russian Federation tax system" from 27.12.1991 № 2118-Ⅰ. The majority of mandatory payments, which currently become the norm in the work of accountant, were first introduced at that time:
  • VAT;
  • income tax;
  • excise taxes and others.

In the future the order of its levying was progressed, but the first main principles of calculation and payment were included back then.
Later was appeared the Tax Code of the Russian Federation:
  • the first its part, generally devoted to tax administration, rights and responsibilities of payers and auditors, was in 1998;
  • the second part, which contained definitions of taxes, the procedure of calculating the base for them, time frame and frequency of payment, were in 2000.

In the following years, the Tax Code of the Russian Federation was repeatedly changed and supplemented, some elements were become more difficult, and others, on the contrary, were simplified. Now it is the main statute, forming the basis of the tax system of the Russian Federation.

It regulates almost all issues on interaction between tax authorities and taxpayers, including:
  • rates;
  • time frames;
  • reporting methods;
  • periods of paying taxes.

Fiscal control authorities also have its new history:

  • In 1990, the State Tax Inspectorate was founded; later it became the State Taxation Service.
  • The Ministry of Taxes and Duties was launched in 1998, but lasted only up to 2004. In future, its authority was transferred to the Ministry of Finance of Russia.
  • At the same period, the Federal Tax Service was instituted in the form in which it operates at the moment. That’s the one that became the main enforcing authority controlling the performing by taxpayers of their duties.

The concept of the Russian tax system at the current stage

The tax system of the Russian Federation is a complex of relationships between fiscal authorities and taxpayers in the field of all exciting taxes and fees. It implies continuous communication of all its members and related objects:
  • payers;
  • legislative framework;
  • oversight authorities;
  • types of mandatory payments.

The structure of the tax system has a three-tier construction:
  • federal level;
  • regional level;
  • local level.

Every mandatory payment is intended for filling the budget of a certain level. There is a list of taxes, having a single per cent throughout the whole territory of Russia, which levied on the basis and completely enrolled in the Federal budget:
  • income tax;
  • profit tax;
  • VAT;
  • excise taxes;
  • water use tax;
  • tax to extraction of natural resources;
  • government duty.

Over here also worth to include special tax regimes:
  • unified tax on imputed income;
  • unified agricultural tax;
  • simplified taxation scheme;
  • patent system.
Taxes of the regional level, although are reflected in the code, are mostly regulated by local authorities. The Tax Code of the Russian Federation establishes only the most common parameters and borders within which the governments of the Russian Federation subjects have the right to regulate them.

So, authorities can independently determine the percentage of the gathering at the region, but it should not exceed the maximum level listed in the Code. For example, the specific conditions for applying of transport tax, tax on gambling industry and wealth tax are approved by local government structures through publishing relevant laws and regulations. Regional administrations can also approve changes in special tax regimes, but strictly within responsibilities contained in the Code.

Local taxes, like other elements of the Russian tax system, are laid down in the Tax Code of the Russian Federation. Local authorities also change its basic parameters of their choice, but within the boundaries of the Code. These include taxes;

  • or land;
  • for individual wealth;
  • sales tax.

The structure of the tax system of Russia at the moment includes the following number of taxes of different levels;
  • 14 federal;
  • 3 regional;
  • 3 local.

It is possible to identify in a separate group special tax regimes, which are exactly 5.
Taxes on an accrual basis are divided into direct and indirect taxes. The first are produced by multiplication the base on the percent; the second are directly included in the price of good, work or service.

In the case of indirect payment, the tax is paid by the purchaser of good, and the one who implements it acts as a facilitator for the state. There are two indirect taxes;
  • VAT;
  • Excise taxes.

Key elements of the tax system

As it has become clear now, the tax system is based on synthesis of interests its participants through the application of various mechanisms of levying financial resources in order to implement fiscal objectives of the state.

The tax system of the Russian Federation includes:
  • all tax payments listed in the Tax Code of the Russian Federation;
  • taxpayers;
  • complex of exciting legislation, regulating fiscal policies;
  • administrative authorities, performing oversight functions in tax matters.

Such a list describes the tax system of the Russian Federation only in brief. For a better understanding it is better to study each point of the list separately. If a subject of tax relations is named in the Tax Code as a payer, the imposed duty should be implemented unequivocally. In this case, were meant both organizations and private individuals, which are fiscal agents that according to the provisions of the Tax Code must pay specified types of taxes and fees.

Employers holding income tax from their employees' salaries and donating appropriate reporting packages can serve as the example of tax agents.

In complete accordance with the hierarchy of tax system, its legislative basis also consists of 3 levels:
  • The laws of the federal level
    Their main difference is that they are binging upon all subjects throughout the country, without exception. All the other legal documents must not oppose them. This is particularly the Tax Code of the Russian Federation, the Constitution, tax laws, which have not contradiction to the first two documents, presidential decrees and government resolutions.
  • The laws of the subjects
    of the Russian Federation regulating the procedure, timeframes and periodicity of regional taxes payment in the Russia territory
  • The local regulatory framework
    established at the level of the municipal authorities and regulating only local taxes and fees.
Moreover, the Ministry of Finance and the Federal Tax Service of Russia have the right to provide explanations on legislation, for which they annually publish a huge amount of orders, letters and instructions. They should help taxpayers and inspection to apply the exciting regulatory framework correctly.

Frequently, such documents are generated from questions of companies and private individuals.

The tax authorities of the Russian Federation include:
  • the Ministry of Finance of Russia;
  • the Federal Tax Service of Russia.

The Ministry of Finance is responsible for the condition of the tax system at the strategic level by making proposals to its improvement, planning the order of the treasury filling and optimization techniques of policy in taxation. At the level of executive authority works its subordinate Federal Tax Service.

The activity of the Federal Tax Service takes place in several directions:

  • registration of payers of taxes and fees and maintaining of the relevant base;
  • administration of the implementation of regulatory acts in the field of taxes and fees;
  • analysis of the correctness of calculation and payment of taxes to the relevant budget.

The tax service brings together a network of tax authorities that includes:
  • management in the regions, which regulate the activities of territorial units and inspectors;
  • cross-regional administrations in each federal district that control inspections regarding the largest taxpayers, data analysis centers and inter-district units.

The origin of the modern tax system needs to look for back to ⅠⅩ century. The key stages of its development associated with the name of Peter Ⅰ and the period following the revolution in 1917. Today’s system of fiscal management began in 2004, together with the creating of the Federal Tax Service of the Russian Federation.

The current tax system should be considered as a single complex of relationships between taxpayers and tax authorities in the field of fiscal payments of budgets of all levels. The key integral parts of the tax system are taxes, fees, inspection, taxpayers, and a package of legislation in this area.

The tax system is represented by a three-level hierarchy: federal, regional, local taxes, as well as relevant legislative framework on each level, which should not contrary to the Tax Code and the Constitution of the Russian Federation. At the federal level search for ways of improvement of tax policy happens continuously.

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