Sergei Tiunov, Managing Partner, BDO Unicon Outsourcing:
Implementation of blockchain-based comprehensive system of tax obligations requires several prerequisites:
- a link between economic actors and operation sources (blocks in terms of blockchain technology), which requires that 100 per cent of actors have a digital signature
- removal of cash from turnover between economic actors
- good will on the part of lawmakers and regulators (transparency will involve all operations, including those corrupt, related-party transactions, secret deals, etc.) Such an initiative is a mighty blow on shadow economy.
Considering all those prerequisites, blockchain’s perspectives in state regulation aren’t that good. Blockchain philosophy contradicts the very core of top-down governance.
Alina Tukhvatullina, Lawyer, Documents Constructor FreshDoc.ru:
Our company deems any legal movement towards simplification of documents and automation of business processes not only progressive but also logical. Automatic ‘statements’ for the purposes of tax control will undoubtedly simplify administration of reporting and accounting systems in Russian companies, and make them cheaper to maintain. But it concerns only those companies that have nothing to hide from tax authorities. Every fiscal control uses the concept of unifying property transactions in an unbreakable chain on the basis of deals and paying taxes thereon. Generally, electronic exchange of tax-related data is no revolution. Its further development will take the path of acceleration, enhancement of transparency, and re-focusing control on earlier phases.
Alexander Yegorov, Head Analyst, TeleTrade:
The very idea of gradual abandonment of statement-based approach is certainly a good one. Doing the same job of accounting and inspecting revenue sources and spending manually, when there are technologies generally capable of making the process secure and automated, is at least irrational. Development of technologies collectively defined as blockchain is very active for various practical purposes. Implementation and application thereof in Russia will require a complex transition period, which includes a series of legal decisions. One may assume the process will take several phases and a few decades.
Elena Odintsova, CEO, OdinGrad:
There are many accountancy blocks subject to online exchange with supervising bodies: VAT, ethanol turnover, and so on. In future, it will include cash register machines. Yes, it will make accounting may easier, and will cut out some jobs in accountant’s offices at general taxation companies. In small businesses using Simplified Tax System, however, the accountant’s role is somewhat bigger: it’s a lawyer, an HR specialist, and a financial manager at the same time. They’ll only benefit from simplified automatic systems: they’ll automatically turn into accounts controllers.
Roman Manko, Lawyer, Tax Advisor, Brand & Partner:
On the contrary, abandoning them may result in abnormality of terms and procedures of statement submission as provided in the current Tax Code. It may happen just because tax payers would fail to introduce the data to the accounting over the entire tax period because, according to Mr. Yegorov, the data will be audited and assessed by supervising entities at once and automatically. Therefore, companies will lose their right to make mistakes, and, which is more important, will inevitably disclose all nuances of their accounting to tax authorities.
It may entail administrative and criminal sanctions due to expiration of statement submission date, provision of inaccurate data, or failure to submit any data whatsoever. There’ll be a higher chance of ending up with tax ‘pre-inspection’ commissions and field tax audits.
Said changes will definitely result in higher professional requirements for specialists involved in compilation and analysis of financial and tax accounts, which in its turn will entail additional expenses for businesses, contrary to what Mr. Yegorov told.
In my opinion, and keeping in mind the Ministry of Finance’s bill on Basic Areas of Tax Policy in the Russian Federation for 2016 and the Target Period of 2017 and 2018, the aforementioned changes are fortunately quite unlikely to emerge in the near future.
Galina Shaldina, chief consultant, MKPCN:
In my opinion, any honest taxpayer has to welcome implementation of blockchain technology in administering their relations with tax authorities. The technology implies immutability of taxpayer data the FTS could have used to assess taxes without their involvement. Therefore, it would render impossible any misconduct on both sides, which, unfortunately, still occurs in Russian tax administering.
The most important aspect of blockchain concept is abandonment of database centralization. In fact, it’s abandonment of various third parties in business processes. Job cuts may be a possible consequence of blockchain implementation, which involves not just accountants, but tax inspectors as well. Certainly, such a prospect cannot appeal to every involved party of tax relationship, which, by the way, finds its confirmation in the FTS’s response to media reports on its plans to use statement-free mechanism of taxation using blockchain technology.
Nevertheless, in the future, close or distant, the FTS won’t be able to avoid using advanced technologies in tax administering. I think the risks, including those tax-related, will move to legal regulation of blockchain usage. In this regard, resolving the issues of transaction correctness in distributed databases and legitimacy of software is most important.
Valentina Sibgatullina, Chief Accountant, Baltic Meridian LLC:
Implementing such a system at an enterprise would allow one to cut the accounting staff, as, according to the comments to the article, there’ll be no need in submitting statements to the authorities. However, in order to input the primary data into the system, as well as to confirm it, the enterprise will have to hire some specialists. Nobody talks about cancelling financial and tax accountancy, even if you don’t have to submit it to the FTS. What about paying taxes? Or the owner will have to trust tax inspectors who, using his or her primary data will assess the taxes payable to the budget?
Still, the IFTS will have to hire a supplementary staff to process information and data they receive. From data control point of view, the system’s usefulness for the tax service is obvious. The FTS will get online access to primary documents of an enterprise, and correctly assess its axes. However, for the enterprise, the usefulness is dubious: accountancy staff might not be cut for above-mentioned reasons (documents input, reports to owners, etc.) Still, enterprises will incur expenses from implementing such a system.
Kira Gin-Barisiavicene, Managing Partner, Group of Legal and Audit Companies SBP:
Abandoning statement-based approach today isn’t quite viable. If we consider online classes we have to take into account that the data go to the FTS which controls whether the entrepreneur accounted for everything, and reflected everything that had gone through the cashier. Presently, there are cashier machines in Russia capable of giving out a receipt and then concealing a part of revenue.
VAT statements are a completely different matter: there are purchase and sales ledgers attached. Therein, the taxpayer decides what to include and what to omit basing on compliance or incompliance of operations and documents with the Tax Code. Therefore, uploading all data in a bulk, as it happens with cashier machines, isn’t possible. Accountants won’t change their occupation, and won’t go working in fields.
Revenue statements are all the same: taxpayers include information compliant with the criteria of income and expenditures stipulated in the Tax Code. In this case they again aren’t able to automatically upload all data on incomes and expenditures.
There’s not much sense to reason about blockchain technology in the light of the aforementioned.
Denis Zaitsev, Advisor, DS Law:
The idea of abandoning tax statements sometime isn’t new. Even now, the Tax Code contains a few examples of the state willing to give up some control component in exchange for a closer contact with tax authorities. Thus, for instance, tax payers undergoing tax monitoring are exempt from tax inspections. Prices are considered commercial, and, as a consequence, taxpayers that had concluded an agreement on pricing with tax authorities are expempt from control in the relevant part. We shouldn’t forget, however, that the supervising entity obtains mandatory real-time access to all taxpayer data in exchange for cancellation of the duty to submit tax statements once a month/quarter/year.
Speaking of total cancellation of statement-based approach, it would require serious unification of accountancy rules alongside with quite strict regulations for introduction of primary documents in the accounting system. From the tax entity’s point of view, implementation of such system via accounting in the tax entity’s cloud service would be perfect. However, even in that case, considering all transition difficulties and importance of the eventual benefits for taxpayers, the perspective of voluntary transition from one-time submission of reports to a continuous monitoring by tax authorities seems quite remote and unpopular.
As for perfecting tax control with blockchain, it’s a mere technology, it’s but a tool. Still, I have to acknowledge that the idea of recording the entire history of transactions in each subsequent transaction grants impressive perspectives for any supervising entity. Still, notwithstanding innovative nature of the concept, there are many questions regarding its practical implementation in tax control. Thus, blockchain implementation is quite understandable in case of Bitcoin as there’s only one operation: money remittance. When it comes to taxation, there are much more operations, and it may prove more difficult to record them all.
Another pressing problem is about observance of tax secrecy requirement regarding the information which, as the technology offers, will be recorded and get distributed within other transactions in an unlimited manner. This issue along with other ones, which are yet not pronounced, move rearrangement of tax control with blockchain technology into the distant future.
Source:
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