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Reforming Chapter 21 of the Russian Tax Code: From VAT to GST

Vol. 20, Iss. 22, NOVEMBER 2017

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Received: 9 June 2017

Received in revised form: 29 June 2017

Accepted: 25 July 2017

Available online: 29 November 2017

Subject Heading: Tax and taxation

JEL Classification: H20, H25, H30

Pages: 1336–1348

Davletshin T.G. OOO Burovye i Neftepromyslovye Nasosy, Kazan, Republic of Tatarstan, Russian Federation

Subject The article explores internal contradictions of Chapter 21 Value Added Tax of the Russian Tax Code at the conceptual level, which are associated with inconsistency of the name of the tax and its economic substance.
Objectives The study aims to analyze shortcomings and deficiencies in the Russian laws on VAT and develop remedial actions.
Methods The study draws on general scientific approaches and methods.
Results The analysis of articles of Chapter 21 shows that in Russia, as in the EU countries, VAT is not a value-added tax. There is a final consumption tax, or a tax on non-entrepreneurial purchases levied 'in the form of VAT'. Chapter 21 of the Tax Code prevents from correct interpretation of the economic substance of the tax due to internal contradictions inherent in the very framework of the Russian Tax Code: the name of the tax does not correspond to its economic substance; object of taxation does not correspond to the real object of taxation, i.e. final consumption.
Conclusions It is crucial to reform Chapter 21 of the Tax Code and harmonize the tax name and its economic substance. I underpin the need for a new version of Chapter 21 titled Goods and Service Tax (GST) and offer its major provisions, which will eliminate internal contradictions and uncertainties of the Tax Code.

Keywords: value added tax, goods and services tax, general taxation system, tax harmonization, indirect tax


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