BGP Litigation senior associate Denis Savin speaks with Regnum news agency about the Finance Ministry's proposal to introduce a sales tax instead of raising VAT to 22%

"Evading sales tax will be more difficult than evading VAT, says the expert.

Sales tax would be a better replacement for VAT, as it is simpler to administer and does not envisage any tax deductions, BGP Litigation senior associate Denis Savin told Regnum on March 21, commenting on the Russian government's intention to introduce a sales tax.

"In introducing sales tax, or rather returning it to the tax system, the authorities see an alternative to increasing the rate of VAT, with possible redistribution of the revenue to the budgets of sub-federal entities of the RF. But most sub-federal entities of the RF will not see any gain from this, since the main retail chains are located in major cities. Sales tax used to be collected but was abolished, because a second indirect tax – VAT – existed in parallel ", said the expert.

Paying sales tax will be easier, says Savin. "Provided the right rates of sales tax are chosen, it will be the best replacement for VAT. First, unlike VAT, sales tax does not involve any tax deductions; the tax is charged on the entire turnover, so it is more difficult to avoiding paying it. Second, it's simpler to administer. No system such as ACS VAT-2 (the software used for automated control of value-added tax) is needed to track it", said the analyst.

"In other words, if sales tax is to be returned, then it should only be as a replacement for VAT", he added.

The full article (in Russian) is available here: "«Доходы субъектам РФ налог с продаж не принесет»".