21.10.08

The Federal Tax Service (FTS) has published an addendum to their list of eleven “Financial and Operating Activities with High Tax Risks” on their official site.

According to FTS, after the publication of the previous list, many companies filed adjusted tax declarations: 913,000 companies adjusted their 2007 taxes by a sum of 84 billion rubles and 416,000 for adjust 2006 returns by 18 billion rubles. 90% of all field audits occur in companies matching these criteria the audit schedule for 2009 will be organized similarly, the FTS said.

The list was made public in 2007 to allow companies to determine their chance of being selected for an audit and the approximate amount of tax claims against them. Most of the 11 criteria deal with economic performance: tax burden and salaries below industry average, losses filed for two years, VAT deductions up to 89%, etc.

The 12th new criterion refers to “most common schemes … used for gaining unjustified tax benefits.” The list of schemes will be published on FTS site after its approval.

According to an employee of the tax service, the list will consist of typical schemes based on specific cases (with the company's names omitted). Schemes on "leasebacks," suspicious real estate operations, and others will be on the list.

Tax consultants object to this policy, claiming that it is the FTS that makes it a risky scheme by placing it on the list. Many of the "schemes" often cited by tax auditors are, in fact, legal, including leasebacks, outsourcing, and payments by borrowed assets. The Supreme Arbitration Court has ruled, for instance, that leasebacks are not tax schemes but a valid business operation.

Companies take these criteria into account and sometimes even show profits while suffering loss – just to avoid being placed in the sites of the tax officials. Officials often mistake "economically unfeasible" for simply "unprofitable," while they have no authority to test the latter.

Starting 2009 a system of mandatory pre-trial settlement of disputes with FTS will come into force, lowering the chances of fines and charges being liquidated quickly. Meanwhile, risks associated with use of these schemes will grow. However, avoiding profitable but "high risk" models lessens a company’s effectiveness and may yet lead to an audit – due to low profitability.

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