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Financial Times discuss the future of VAT with Russian Head of Federal Tax

Mikhail Mishustin, Russia’s head of tax service, has recently explained to the Financial Times his plan for the future of digital tax in Russia.

Showing his plans for the first time to an international media organisation, Mishutin shares he is an advocate for digital, real-time tax administration with no tax returns. Currently, Russian authorities receive receipts of every transaction, across all of Russia, within 90 seconds. This was proudly demonstrated by Mishutin telling FT reporter Chris Giles exactly what type of coffee he had ordered from his hotel that morning.

This real-time information exposes errors, tax evasion and fraud when collecting VAT allowing the Russian government to raise revenue much faster than other traditional VAT systems.

Through embracing forward-thinking VAT technology, every invoice can be checked in real-time to ensure there are no fraudulent activities and then using artificial intelligence, efficiently identify unusual patterns or broken links which provide data to the authorities on who to target for a tax audit.

Their new system is aimed at small-to-medium size businesses,‘think more shopkeepers than oligarchs’ Giles states, and critics believe targeting smaller firms does not do enough to drag Russia up the Transparency International Corruption League table, where they are ranked 138/180 worldwide, however reducing tax evasion could be the first step in a long journey.

From 2014 to 2018 the revenue collected from VAT in Russia rose by 64%, whilst the VAT gap has fallen to 1% from a lofty 20% gap in 2014, so early statistics suggest the new system is working very well.

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