The most heated debate was noted around matters associated with a possible privatization of educational institutions’ assets under their transition to the status of AI, though the authors of the statute believe that it contains a number of provisions that block privatization of educational institutions.
First, as it was noted above, an autonomous institution may not, without its owner’s consent, effectively control the respective real estate and particularly valuable movables. Second the law on education contains a general ban on privatization of the government and municipal property used for educational purposes. Third, the bill provides for a number of restrictions on schools and universities’ entering in huge deals, Fourth, the law provides for a compulsory public reporting, including mass media in particular. In addition, such forms of control as accreditation and licensing are still in force for educational AIs.
The core managing body for AI appears its supervisory board tat should exist as a form of the government and public control. The law explicitly sets the board’s mandate, including procedures of its formation, how the AI head should report to it, and what kind of managerial decisions the board can rule. Both representatives of local community and those of the executive government agencies should be co-opted to the supervisory board; as concerns representatives of the AI itself (except for its head and his/her deputies), while holding seats on the board, their proportion may not exceed one-third there. This enables the government to secure its control over the AI’s operations and helps keep the institution’s operations transparent for the community. In addition to carrying out recommendation functions, the supervisory board, upon submission of the AI head, approves draft reports on its operations and use of its property and assets, fulfillment of its plan of financial and economic performance and the annual accounting. The supervisory board rules mandatory for the AI head decisions on entering in huge deals and those in which there is interest, as well as on auditing the institution’s annual accounting and approving an auditor.
It should be noted that heated debates and a broad discussion amid various professional and public associations on the law ‘On autonomous institutions” compels one to most thoroughly consider possible negative socio-economic effects of implementation of the statute.
More specifically, there exist concerns that the noted voluntaryism of the educational institutions’ transition to the AI status would be violated. While big universities and strong schools with an impressive record of operations with extrabudgetary funds will see such a transition as a blessing tat would enable their heads to fully utilize their resources for the sake of further advancement, for a considerable number of general education institutions, the deprivation of the right to independently control extrabudgetary funds under the existing level of budgetary financing should inevitably force them to change their status.
The adoption of the statute also provides for adoption by the RF Government of a number of bylaws, such as, for instance, Procedures of identification of particularly valuable movables, without which AI would find it hard to carry out their operations. According to the bill, it will be bureaucrats who will decide what kind of assets of a government or municipal institution should be labeled as particularly valuable. As well, the problem of procedures of formation and placement of government and municipal orders on educational services among AIs so far remains unanswered. Hence serious concerns that given possible abuses on the part of some civil servants, the founder’s decision would not always mirror actual requirements of accessibility to and quality of provision of educational services.
Great hopes in the area of development of government-and-public control in the educational sphere are associated with creation of supervisory boards for AIs, which should replace the existing selfgovernance system. However, the introduction of a quantitative limitation of the supervisory board (between 5 and 11 members) for all kinds of educational institutions, be those big universities or small schools in the countryside, raises certain doubts. Plus, given nascent civil society, there will arise certain complexities with formation of valuable supervisory boards that would be capable of assuming responsibility in full, as read by the law.
Thus, success in implementation of the guidelines of the federal statute “On autonomous institutions” recently passed by the State Duma to a significant extent will depend on a thorough design of bylaws, coordination of its provisions with those of other associated acts and a rigorous ensuring of voluntaryism in initiating the transition towards the status of autonomous institution.
I. Rozhdestvenskaya Current Problems with VAT in Russia In the present time the trends of further enhancement of VAT are widely discussed in Russia. Actually, the situation of the first half-year of 2006 caused fierce disputes about an approach to this type of tax. On the one hand, a number of amendments were introduced to Chapter 21 of the Tax Code, aimed at enhancement of VAT effectiveness, elimination of the existing discrepancies and bringing the Russian value added tax it in line with the international standards.
On the other hand, an expressed negative dynamics of VAT proceeds inflow to the national budget was observed since the beginning of 2006, an excessive growth of tax deductions and refunds as compared with the charged tax. All the above makes it necessary to discuss expediency of measures taken in regard to VAT and prospective trends of its further development (including the expediency of introduction of the planned measures) and even abolishment of the value-added tax and replacement thereof with a modified sales tax.
In our opinion, the majority of current publications provide an inconsistent and subjective estimates of the situation, which often result in unjustified conclusions. Below the results of an analysis of dynamics of value-added tax proceeds are presented, made by the Institute for Economy in Transition, as well as some recommendations for further enhancement of that tax.
According to the information of the RF Ministry of Finance, within the first half-year of 2006 the inflow of VAT proceeds to the budget of the Russian Federation overcame RUR 717 billion, i.e. 5.per cent of GDP (including VAT on imported goods in the amount of RUR 250 billion, or 2.07per cent of GDP). As per results of the year 2005, budget revenues from the value-added tax have made over RUR 1472 billion and their share in GDP was 6.8 per cent (including VAT on imported goods in the amount of RUR 446.5 billion, or 2.0 per cent of GDP). Alongside with that, one should notice that in the first half-year of 2005 VAT proceeds in the budget system made about RUR 587 billion, or 6,per cent of GDP (including VAT on imported goods in the amount of RUR 193 billion, or 2.05per cent of GDP).
Therefore, it should be stated, that in the background of stable level of revenues from VAT on imported goods within a complete period under review, a decrease of VAT proceeds to the budget was observed in regard to the tax administered by the Federal Tax Service, i.e., VAT on the goods sold on the territory of the Russian Federation. The decrease of those revenues made 0.85 per cent point in GDP as compared to 2005 and 0.28 per cent points of GDP versus the first half-year of 2005.TF FP.
P T Let us review potential grounds of such dynamics of tax proceeds in detail:
1) The retained level of proceeds from VAT on the goods imported to the customs territory of the Russian Federation in general matches the dynamics of import level of 2005 through the first half-year of 2006. According to the Rosstat data, the share of imported goods in GDP made 13 per cent in the first half-year of 2005, 13.5 per cent as of end-of year 2005 results and 13.6 percent in the first halfyear of 2006.
2) An expressed impact on the amount of VAT proceeds to the federal budget in 2005 was provided by the inflow of extra VAT amount, charged as a result of audits of YUKOS oil and gas company, which has been received by federal budget in January 2005 upon the sale of Yuganskneftegas. Total amount of extra federal budget revenues from redemption of NK YUKOS tax debts in 2005 can be estimate as RUR 120 billion (as per the RF Federal Tax Service reporting, in January 2005 the valueadded tax proceeds have exceeded RUR 220 billion, and only RUR 100 billion were charged under tax returns of the current tax year), which makes 0.56 per cent share in the annum GDP, or 1.27 per cent of GDP within January – June of 2005.
Therefore, with no regard to extra budget revenues of the beginning of the year of 2005 in the analysis of VAT dynamics in 2005 – 2006, the share of VAT proceeds in GDP within the first halfyear of 2006 has grown by 1 per cent point and decreased within the year only by 0.3 per cent point as compared to the first half-year of 2005.
3) Analyzing the dynamics of components of the value-added tax on the goods sold on the territory of the Russian Federation, one should first of all pay attention to the dynamics in the amount of charged tax (i.e., estimated VAT amount on goods, works and services sold on the territory of the Russian Federation under zero tax rate), as well as the dynamics of tax deductions.
Please, find the relevant data in Table 1.
Table 2005 January – June 2005 January – June % in RUR, bln GDP RUR, bln % in GDP RUR, bln % in GDP VAT liabilities, total 8755.3 40.5% 3821.6 40.5% 5619.5 46.6% VAT refund 7384.6 34.2% 3205.0 34.0% 4873.3 40.4% Amount of tax, estimated as per tax returns, total 1370.7 6.4% 616.6 6.5% 746.1 6.2% For reference: GDP 21598 9429 Source: RF FTS (Form 1- VAT), Rosstat, (author’s computations).
PT TP It should be mentioned that the dynamics in the amount of VAT proceeds and their share in GDP might differ due to seasonal fluctuations. Therefore, comparison of the VAT share in GDP within the first half-year of with the relevant indicator for 2005 might be incorrect to a certain degree. However, this factor is not taken into regard in further analysis.
It is clear from the data presented above that both, the amount of the estimated VAT in and the amount of VAT subject to refund have grown within the first half-year of 2006 versus the year of 2005, whereas throughout that year those indicators stayed practically unchanged (in terms of their share in GDP). Moreover, the indicators of the amounts of the estimated VAT and VAT refund have increased practically at the same rate, by 6 per cent points. This is a 15-percent increase against the estimated VAT liabilities and almost 19-per cent growth of VAT refunds.
One should note, that those changes in the dynamics of VAT tax liabilities and refunds are clearly explained by the impact of amendments, made to the tax legislation, brought into force on January 1, 2006, which have revised the procedure of the tax liabilities estimation and payment.
First, a compulsory transfer has been made to imputed method of tax assessment in regard to both, the moment, when tax liabilities arise, and the moment, when the right for refund comes into effect.
Second, the general legal regulations of tax refunds (in the same tax period, when the goods were sold, works performed and services provided), will be applicable to VAT chargeable on capital assets.
Those measures alone do not provoke changes in the budget revenues in the long-term perspective (regardless the inflation of tax liabilities and refunds, like in previously effective procedure). However, they can boost considerable fluctuations in tax proceeds in the short-term outlook, what is justified by two reasons.
Firstly, in the framework of mandatory transfer to the imputed method of taxation starting form January 1, 2006, VAT taxpayers have obtained the right to deduct from the tax base the amount of taxes on the goods, works and services, which have been received, but not paid yet as of that date.
Besides, VAT taxpayers are obliged now to deduct to the budget the tax on the goods, works and services, which have been provided (supplied, performed), but not paid yet (according to accounts payable for the goods, works and services as of January 2006).
It should be mentioned, that according to the provisions of Article 21 of the Tax Code, effective before January 1, 2006, the taxpayers could apply the imputed method of taxation only in regard to the sold goods (performed works, provided services), i.e. exclusively to “output VAT”. With the introduction of the new regulations, those taxpayers have the right to enter all relevant amounts of VAT into accounts payable before January 2006 and get a refund by equal installments within the first half-year of 2006.TF FP.
P T For other taxpayers (who were using cash-based method) more complicated transition measures are foreseen. Thus, within the years of 2006 and 2007 the taxpayers will perform their tax liabilities on cash basis on taxable operations, performed before January 1, 2006 (on the payables and receivables).
The balance of their tax liabilities and tax refunds, due as of January 1, 2008, should be settled within the first tax period of the year 2008.TF FP.
P T One can see from the newly introduced transitional provisions, that there can be expected some temporary budget losses within the first half-year of 2006, because a large group of taxpayers, who were applying an imputed method of tax assessment before (and to whom the situation is not changed), have now the right to expand the amount of their tax refund. According to the estimates of the RF FTS, due to that reason in January-June of 2006 the amount of under-collected tax made RUR 116 billion, i.e. 0.96 per sent of GDP.
Secondly, starting from January 1, 2006 there introduced a new procedure of VAT refund, paid by the supplier to the contractor in capital construction. Unlike the procedure that had been in effect before, where the taxpayer had the right for VAT refund only upon registration of the finished construction object, according to the new procedure effective as of January 2006, the taxpayers have the right to apply for refund in the same tax period, when relevant expenses were made (i.e., in accord with common procedure).
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