The President congratulated the Head of the FTS and its staff on their professional holiday.
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President of Russia Vladimir Putin: First of all, I would like to congratulate you and all your employees on Tax Authority Worker’s Day. This is a structure whose performance forms the basis of the entire budget, of its main and largest part, and so creates the conditions to address social issues, as well as issues of security and state building. So as they say, the importance of your agency cannot be overstated, and we won’t do this.
We know what a tax service and tax agencies are. And, of course, the first and usual question of all our meetings is: what was your performance like over the past period, according to your estimations? What is your prognosis until the end of the year?
Head of the Federal Taxation Service Mikhail Mishustin: Thank you, Mr President, for your greetings.
Over the ten months of 2019 we transferred 18.9 trillion rubles to the consolidated budget, which is 7.9 percent higher than for the same period of 2018, and 10.5 trillion rubles to the federal budget, which is about 7.1 percent more.
The growth of tax revenue continues despite the decreasing oil prices: 8.6 percent down over the corresponding taxable period. This means that the tax revenue from the extraction of natural resources is slowing down due to the tax manoeuvre. And, of course, the refund of repayable excise tax also plays its role: about 347 billion rubles was refunded over this period in accordance with the fluctuations of oil product prices.
But the main contribution to the increase in revenue is from non-oil and gas revenues, and without MET and repayable excise duty, the consolidated budget would have grown 12.4 percent and the federal budget, 18 percent, if conditions were similar to last year’s. Importantly, VAT revenue is growing, adding 16.7 percent or 3.5 trillion rubles, which is a half a trillion rubles more than over the same period last year. Indicatively, raising the VAT did not increase inflation, which now stands at about 4.7 percent. This is an important point. Many analysts predicted that this would increase inflation but it didn’t happen.
Vladimir Putin: They predicted this.
Mikhail Mishustin: Yes, they did. Absolutely true.
Importantly, the share of shady transactions on VAT taxes – something that the entire world monitors – is at a minimum level in Russia. The VAT gap is below 0.6 percent, one of the world’s lowest figures.
The number of shell companies is decreasing due to our cooperation with Rosfinmonitoring, the Central Bank and law-enforcement agencies. Over six months ago you and we recorded a historical minimum, and now this figure is even lower. Today, shell companies comprise about 3.2 percent of the 120,000 legal entities registered in Russia. I hope that the times of such rogue companies with aggressive plans in the Russian economy are gone forever.
Tax on profit received from companies totalled about 4 trillion rubles, which is 13.5 percent more than the respective period before. Importantly, the profits of revenue-earning companies went up by 8.4 percent. Income tax increased 8.4 percent, which is 1.2 percent more than the salary growth rate, plus about half a trillion rubles added to administration of insurance premiums. These are payments to the Pension Fund, Mandatory Medical Insurance Fund and the Social Insurance Fund. These are the results for 10 months. In our estimate, all key parameters in the macroeconomic forecast for the rest of this year will be reached.
I would like to say a few words about such an important tax, which is also known as the “Google tax.” In fact, this is a tax on online services that are provided to us, among others, by foreign software producers in the Russian Federation. We have, actually, very good numbers, the results for the almost three years since it came into effect in Russia. As a reminder, initially, in the first stage, all foreign software producers rendering services to individuals in the digital economy in Russia had to pay VAT on those services so as to balance conditions with Russian companies that offered the same services. And since January 1, 2019, they are required to register with the tax service, and pay VAT themselves when working with legal entities.
The tax revenue from foreign organisations will be around 82 billion rubles, which is about $1.4 billion, with minimal investment on our part. In other words, we have invested tens of millions of rubles in infrastructure, that is, software design.
What is crucial here is that, first, this service model for administration allows foreign companies to see clearly and transparently the volume of services they provide in the digital economy. This has been much talked about recently, how revenues should be calculated, how to tax income under a developed digital economy.
I would also like to report on the reform of the cash register system. It is in its third stage, which is almost finished now, and I would like to give you the basic numbers.
Thus, the number of active cash registers has increased 2.5 times compared to the pre-reform period and currently stands at 3.2 million cash registers in operation whereas there were slightly over 1 million before the reform. Business has embraced this technology and likes it because it makes it possible to be straight with the Tax Service and also to better control their business.
Importantly, you instructed us back then to provide a way for buyers to easily check what they bought. I want to report that as of today we have begun a special service and consumers can check the legality of the business they buy from and also whether the purchase corresponds to what is printed on the receipt, what they really bought. Over 720,000 receipts are checked daily. This is a fairly large number, but I would like to say that there are over 200 million receipts printed every day that total some 120 billion rubles; the average check nationwide was about 700 rubles in November.
I hope we have also provided many companies with an opportunity to use these services to actually help people look for the best values for their family budgets.
To conclude, I would also like to say a few words about the draft law on occupational income, on the self-employed. You chaired a Government meeting recently, Mr Siluanov [Deputy Prime Minister – Finance Minister] reported on this.
Vladimir Putin: Does this provision work?
Mikhail Mishustin: Yes. I would like to report that currently over 284,000 people have voluntarily (they do not have to do so) registered as occupation (entrepreneur) income tax payers. The total income received by self-employed individuals is over 32.6 billion rubles. The amount of tax assessed during this pilot programme is already over 1 billion rubles, whereas over 67 percent of taxpayers never reported income from entrepreneurial activity before.
What is important for us is that those who download this application from the internet assess it highly. At this point, the average score is 4.3 on a five-point scale. This is important for us since we service this system online 24/7. And I would like to say that we will pursue the decision to expand this programme to 20 regions; that is, we are reporting that the Tax Service is now technically capable of managing this expansion.
Vladimir Putin: Good. What is your forecast for the year; will you hit the target or exceed it?
Mikhail Mishustin: Mr President, we are trying to go a little above the target. There is currently a small reserve. I hope we manage.
Vladimir Putin: Fine.