Country Programme on Taxation with the Russian Federation
The OECD's country programme with the Russian Federation represents the largest and most comprehensive bilateral programme. It involves both the work of the Committees on Fiscal Affairs (CFA) and non-member activities.
The major elements of the programme of co-operation are:
Russian participation in CFA working party meetings and activities
Seminars on international tax issues
Courses at the Moscow International Tax Centre
Participation of Russia in the multilateral tax centres
Assistance with reforming the Russian tax system
Co-operation with the Duma
OECD Member countries, with their significant investment and strategic interests in Russia, have a large stake in ensuring Russia's successful transition to a market economy. A well functioning tax system is vital to these efforts. The OECD's Russian tax programme is designed to familiarise Russian officials with Western tax policies that promote domestic and foreign investment, improve the quality of international tax agreements, and protect taxpayer rights, including confidentiality. A wider focus of the programme has been on assisting the Russian tax administration to implement reforms. By offering a range of solutions drawn from Member and non-member countries alike, the OECD programme has helped Russia develop practical solutions to tax implementation issues and will, it is hoped, lead to improved tax compliance and collection.
The Main Programme Objectives are:
to help stabilise the revenue base by countering tax evasion and promoting voluntary compliance
to integrate Russia into the work of the CFA
to promote Russia's adoption of OECD guidelines on tax treaties, transfer pricing and exchange of information
to encourage policies that promote domestic and foreign investment
to support bilateral and multilateral programmes and improve co-ordination of Member countries programmes in Russia
to implement sound tax policies through fair and efficient administration of taxes
to assist the regions in building common tax administration procedures
to empower Russia to develop its own comprehensive tax training capability
Russia's Observership in the CFA provides a channel of dialogue on Russian tax policy reform and the application of OECD guidelines in the following areas: transfer pricing; tax treaties; the exchange of information; and taxpayer confidentiality. Some immediate and concrete results of this dialogue are: a new transfer article, enacted in Summer 1998; tax treaties which increasingly follow the OECD Model Convention; practical improvements to the quality and timeliness of exchange of information à¢Â€Â? the most important tool for countering international tax evasion.
The Moscow International Tax Centre (MITC) was established in 1993 as a joint initiative of the Russian State Tax Service (STS), the European Union, the OECD and Member countries. The Centre operates under the direction of a Steering Committee which includes representatives from each group. Major donors include the IMF, United States, Germany, United Kingdom, Canada, Sweden and Ireland. The programme was launched in recognition of the importance effective tax administration plays in the transition to a market economy, and to help the STS ensure that its taxation procedures are both fair and effective. Since then, more than 100 activities have been organised, ranging from two day workshops for high-level officials on strategic management to two week seminars on income tax and VAT audits. More than 4,000 Russian tax officials have participated in MITC programmes to date. With the OECD and EU taking the leadership role in course design, and representatives of the Steering Committee providing instructors, the MITC is an encouraging example of how successful multilateral co-operation can provide considerable economies in planning and operations à¢Â€Â? and prevent the duplication of effort among donors.
The OECD has provided input into the development of the international aspects of the Russian tax code. Practical assistance has been given in fighting international tax evasion and avoidance and assessing whether there are appropriate policies for developing innovative financial instruments and sound, transparent financial institutions and markets. Recognising the importance of engaging the legislature in policy dialogue, OECD officials have met with members of the Budget Committee of the Duma. These meetings have helped Parliamentarians to better understand how tax proposals currently under discussion in Russia relate to policies in Member countries.
In 1996, OECD Member countries performed a comprehensive review of the Moscow International Tax Centre. That review identified a number of benefits provided by the Centre, including:
exposure to practices in more developed countries and to OECD developed guidelines
interaction and experience-sharing with Russian colleagues from other parts of Russia
fostering international co-operation through a unified programme providing considerable economies in planning and operation - thereby avoiding duplication of efforts
assisting the Russian authorities in the development and dissemination of best taxation practices and procedures
immediate improvement in the expertise of staff to apply tax laws fairly and efficiently .
The present financial crisis and Russia's inability to access foreign capital markets have increased the pressure to develop a well functioning tax system that produces a stable revenue base. In this context, tax assistance is even more important - along with the need for new strategies and mechanisms to deliver assistance. The Russian country programme has been redesigned to take into account the new realities in Russia. The three main elements of the programme are:
Closer Russian association with CFA work
Planning for the Russian programme takes into account its new status as Observer in the CFA and the Working Parties on tax treaties, the taxation of multinational enterprises and international tax avoidance and evasion. Observer status allows Russian experts to participate in OECD work in these important international areas. This avenue for policy dialogue and exchange will continue and intensify as the Committee focuses on three areas of particular importance to Russia:
Policies to develop a fiscal climate which promotes foreign direct investment
Tax policies to counter international tax evasion through tax havens
Tax policies to support sound financial institutions and markets.
Expanded role of the State Tax Service (STS) in Management of the Moscow International Tax Centre (MITC)
In recent years, the STS has assumed a greater role in the management of the MITC. An expanded role for the STS is important to ensure that the centre's programme is tailored to Russia's evolving needs and to make individual courses as specific to the Russian situation as possible. Another strategic change is to target high revenue regions for special programmes à¢Â€Â? thereby developing their ability to maximise revenue collection. This regional programme will include specialised staffing, enhanced technology, and specialised training.
Tax Reform Assistance
Given the urgent need to react to the Russian financial crisis, the OECD plans to assist the Ministry of Finance in the following areas:
identify whether existing tax policies encourage long-term foreign direct investment (treatment of debt as compared to equity, thin capitalisation rules, treatment of distributed profits as compared to retained profits), or allow international tax evasion and avoidance (treaty and law abuse);
identify whether there are appropriate tax policies for innovative financial instruments and for the development of sound financial institutions and markets (taxation of financial institutions, treatment of bad and doubtful debts);
organise seminars, small workshops and meetings to develop specific policy and implementation advice.