1.1. The Russian Federation is passing through a difficult period of economic development. Having chosen the transfer towards market economy, liberalisation and democratisation of the economic life as its strategic course, Russia stands at the cross-roads, facing a choice of two directions: to either overcome the stage of depression in the nearest years and enter a qualitatively new productive situation which will provide a dynamic social and economic development, or to take an evolutionary route preserving a lot of the present-day negative tendencies, threatening the Russian economy with a long-term stagnation.
1.2. In ensuring the country's progress along the first direction and in solving fundamental and strategic tasks it is recognised that the tax and budget systems meant to provide the formation of the state's finances required to resolve the tasks of social and economic development and their effective distribution and usage, play a very important role.
2.1. The state revenues of the Russian Federation are the major instruments of the state regulation of the economy. These consist of the federal budget revenues, budget revenues of the subjects of the Russian Federation as well as autonomous budgets of state extra-budgetary funds. Over 30 percent of the country's gross domestic product is redistributed through the system of the state revenues.
2.2. The state revenues are composed of tax and non-tax returns. A tax, charge, duty or other payment, according to the Russian legislation, is a compulsory contribution to the budget of the relevant level or to an extra-budgetary fund, effected by payers in accordance with the procedures and under conditions prescribed by legislative acts. The combination of taxes, charges, duties and other payments, collected by the established procedures, constitute the tax system of the Russian Federation. Taxpayers are legal entities and individuals who bear the duty to pay taxes imposed by law.
2.3. The taxes are subdivided into direct and indirect ones. Direct taxes are collected directly from property-owners and income-receivers, indirect taxes are collected in the sphere of marketing and consumption of the product, goods, works and services, i.e. ultimately from consumers. The major direct taxes, effective during the current budget year, are the tax on profits (returns) of enterprises and personal income tax, indirect ones are Value Added Tax and excises.
2.4. As to types of taxes, collected within the territory of the Russian Federation they are divided into several types: federal taxes, taxes of the subjects of the Russian Federation and local taxes. The competence of the state authority in resolving tax issues is as prescribed by the Law on Fundamentals of the Tax System of the Russian Federation and other legislative acts.
2.5. The share of tax revenues in the total budget revenues is constantly growing. In 1995 the share of tax revenues in the total revenues of the consolidated budget (the Federal Budget and the budgets of the subjects of the Russian Federation) made 83 percent. In 1996 the share was 84 percent; the federal budget for 1997 projects the share at 86 percent of the total revenues.
2.6. Federal VAT (in 1996 - 30.4 percent), tax on profits (20.4 percent), personal income tax (12 percent) and excises (11.3 percent) constitute the bulk of tax revenues in the consolidated budget.
2.7. These taxes are the regulating revenue sources and are distributed between the Federal budget and budgets of the Russian Federation subjects according to proportions established when adopting the annual federal budget. The Federal Law "On The Federal Budget for 1997" reads, specifically, that the revenues of the federal budget are formed by 75 percent of the tax revenues of VAT for goods (works and services), produced within the territory of the Russian Federation, by 100 percent of the tax revenues of VAT for goods imported to the Russian Federation, by taxes on profits for enterprises and organisations along the set rates in accordance with the effective legislation, by 100 percent of revenues from excises on oil, gas, petrol and cars, by 100 percent of revenues from excises on goods imported to the Russian Federation's territory, by 50 percent of revenues from excises on alcohol, vodka and liquor, manufactured inside the Russian territory. The personal income tax revenues in 1997 are transmitted into the budgets of the subjects of the Russian Federation in full.
2.8. The non-tax revenues of the federal budget are composed of earnings from foreign economic activity, receipts for privatisation, as well as federal state-owned property.
2.9. The state extra-budgetary funds (Pension fund, Social Security fund, Employment funds, Compulsory Medical Insurance fund) are formed by contributions to these funds made by enterprises and organisations according to established rates of the wages fund, and have strictly designated purpose.
3.1. The tax system currently effective in the Russian Federation today was, for the most part, created in 1991-1992 and has been established both by a package of tax laws (on specific taxes) and by several laws of a more general essence such as those On the Fundamentals of the Tax System in the Russian Federation, On State Tax Systems of the Russian Federation, On the Fundamentals of Budget System and Budget Process in the Russian Federation.
3.2. Direct taxes are regulated by the following major laws: Law "On the Profits Tax for Enterprises and Organisations" and Law "On Personal Income Tax". The main points of these laws are described below.
3.3. According to the Profits Tax Law, the subject of taxation is the gross profits, i.e. the sum of gain (loss) of sale of the product (work or service), fixed assets and other property of the enterprise and the income of the other-than-sale transactions, minus the sum of expenditures for these transactions. This gain(loss) is determined as a difference between the proceeds from sale of the product (works or services) without VAT and excises minus the costs of manufacturing and sale included in the price of the product (work or service). The product cost should be calculated according to the Decree, adopted by the Government of the Russian Federation. The profits calculated this way are subject to taxation in the part included into the Federal Budget, at a rate of 13 percent.
3.4. The profits tax is transmitted to the budgets of the subjects of the Russian Federation at rates established by the legislative (representative) bodies of the subjects of the Russian Federation, at a rate not exceeding 22 percent of the total collection; as to the profits derived by enterprises through intermediary operations and deals, exchanges, broker agencies, banks and other credit organisations and insurers - at a rate not exceeding 30 percent of the total collection.
3.5. Another important direct tax is the personal income tax. It applies to virtually all the layers of the Russian population and plays an important regulating role not only in terms of wages payment but also in re-distribution of profits, stimulation of production, in solving social problems.
3.6. The Law on Personal Income Tax gives a precise definition of the taxpayers, the,subject of taxation and income not liable to tax. It establishes the tax rates for taxable gross income received in the calendar year. Special chapters of the Law deal with taxation of income gained by individuals at the main employment, outside their main employment, and other income, particularly the taxation of foreigners' income and persons of non-citizen status, residents or non-residents of the Russian Federation.
3.7. The issue of individual declaration of the gross annual income is outlined as a particularly important one. A special chapter of the Law is devoted this matter.
3.8. The Value Added Tax and Excise-duties are the most significant of the indirect taxes.
3.9. The Value Added Tax is a form of withdrawal into the budget of a part of the added value, created at all the stages of production and defined as a difference between the sold product (work, service) and the cost of material expenditures, referred to as the expenses of production and circulation.
3.10. VAT is paid by enterprises and organisations who have the status of legal entities under the Russian Federation's legislation, including enterprises with foreign investments, which carry out industrial or other commercial activity, independent of their type or administrative affiliation. The taxpayers of VAT in reference to goods imported to the territory of the Russian Federation are enterprises and other entities, defined in accordance with the legislation of the Russian Federation.
3.11 The objects of taxation are turnovers of sale within the territory of the Russian Federation of goods, performed works and provided services, imported to the territory of the Russian Federation in accordance with customs regime established by the customs legislation of the Russian Federation. The taxable turnover is determined on the basis of the cost of the product under realisation that is calculated proceeding from:
3.12. When calculating the taxable turnover from excisable goods, the sum of excise is included.
3.13. The VAT is paid at the rate of 10 percent for food products (except for excisable ones) and goods for children, when releasing the above goods for industrial processing and industrial consumption, for grain, raw sugar, fish and sea-products, released for use for technological purposes, for feed stuff production and for production of medicines; and at the rate of 20 percent for other goods, works and services, including the excisable foodstuffs. The said rates are also used to calculate the VAT for the goods to be imported to the territory of the Russian Federation.
3.14. Excises, that are indirect taxes and are included in the price of the goods (products), have been introduced for some goods. The list of goods subjected to excises is restricted: alcohol, liquors, beer, tobacco products, jewellery, oil including gas condensate, petrol, cars. The excise tax is paid by enterprises and organisations that manufacture and market the excisable products. In reference to goods imported to the territory of the Russian Federation, the list of excise taxpayers is defined by the Russian customs legislation.
3.15. The object of taxation is the cost of excisable goods, determined on the basis of the selling prices, including the excise at a fixed rate. The excise rates for excisable goods manufactured inside the territory of the Russian Federation are established as percentage share of the manufacturer's prices - for oil in roubles per ton.
4.1. The principal standpoint of the Russian tax legislation is to provide equal responsibility of the taxpayers to the budget, to ban tax privileges of individual nature. At the same time it does not rule out the requirement for flexible taxation and creation of conditions for production development through the taxation privileges, some socially-valid industries and certain types of activity being relieved from the taxation burden.
4.2. The Law On the Fundamentals of the Tax System in the Russian Federation provides for establishment of the following tax privileges, by the procedures and on the conditions determined by legislative acts: a non- taxable minimum of the taxable object; withdrawal of certain elements of the taxable object out of taxation; exemption from taxes for individuals or categories of taxpayers; lowering tax-rates; deduction of the taxable salary (tax payment during the accounting period); purposeful tax benefits, including tax credits (delay in taxation); other tax benefits. These privileges are specified by the laws on particular taxes.
4.3. Thus, The Law on Profits Tax provides for a number of tax benefits, specifically, by means of decreasing the taxable profits used for financing capital investments of industrial purpose, housing construction as well as repayment of bank credit received and used for these purposes; for sums of enterprises expenditures used to maintain at their balance the social and cultural objects and housing fund, for sums of charity donations, contributions to ecological and health-care funds and other similar goals under the condition that the overall sum of these donations does not exceed 3 percent of taxable profits (in special cases - 5 percent). The profits tax rates are lowered by 50 percent in the event of at least 50 percent of the employees of the enterprise being disabled. Small business enterprises have additional benefits. For enterprises that sustained damages over the previous year, part of the profits allocated to recover losses is relieved from taxation for the next five years.
4.4. The profits of religious organisations and enterprises which are owned by them, of cult activity, manufacturing and marketing of cult and religious items, the profits of the invalids public organisations and enterprises which are their property, with the authorised capital stock fully made up of contributions by the invalids' public organisation; of specialised prosthetic-orthopaedic enterprises; of traditional folk handicraft industry are not subject to taxation.
4.5. But recently the practice of granting tax benefits has turned hypertrophied to a considerable degree. In many cases the privileges were granted without sufficient substantiation, and were not used effectively. Numerous benefits result in a considerable decrease of the budget income, violate the principle of fairness of the tax system regarding those participants of the economic life who enjoy no tax privileges, and increase their tax burden.
5.1. The execution of taxpayers payment orders to pay taxes and payments routes to the accounts of Federal Treasury schematically follow the following fashion, though varying through different regions:
5.2. At the same time the register of the payments made is sent to the Payment Centre through computer communications.
5.3. The LFT daily transfers one copy of the register of payment orders from taxpayers to the relevant Local Tax Inspectorate.
6.1. By its structure and principles of operation Russia's present tax system basically corresponds to the world-wide practice of tax systems. At the same time, although the Russian tax legislation is being constantly improved, the political and economic reforms under way in the country and changes in legal and budget relations between levels and branches of power call for a reform of the existing tax system. These requirements are prompted by extremely complicated nature of the current tax legislation, numerous regulating acts, frequent discrepancies between the Law and sub-Law acts regulating tax relations; by the necessity to bring in line the legislation on banks and taxes; to introduce into tax legislation strict and overwhelming rules of tax calculation and tax payments reflecting today's realities, the mechanisms of recovery in case of non-payment, to improve measures of enforcement and penalties for failure to satisfy obligations to the budget.
6.2. In this connection special significance has been attributed to such instrument of implementation of basic objectives in the sphere of taxation as the Tax Code of the Russian Federation, the draft of which has been submitted by the Government of the Russian Federation to the State Duma of the Federal Assembly of the Russian Federation and accepted by it in the first reading, i.e. conceptually. The Code is a systemised legal act, intended to ensure a complex approach to resolving the problems of tax legislation, to relieve the tax burden and to bring the taxation norms and rules into a systemised, unified, logically integrated and co-ordinated system that will resemble the tax systems adopted in the developed economies to the maximum.
6.3. The adoption of the Tax Code, according to the concept of its architects, will allow achievement of the following objectives:
6.4. It is expected to form a rational tax system and simplify it by abolishing taxes that violate the economic integrity of Russia, slow down or distort the motives for economic or investment activity. It envisages abolition of the taxes paid on proceeds from sale of goods (works and services), minimising taxes and duties of purposeful allocation, bringing together separate taxes and other compulsory payments having basically the same tax basis, and abolition of taxes that give insignificant income but are costly to collect.
6.5. Specifically, it is projected to abolish taxes on sales of fuel and lubricants, road taxes, taxes on purchase of cars, maintenance of housing fund, fees for educational establishments, target taxes to maintain the police, to improve services and utilities, and other numerous taxes and fees applied on the territory of the Russian Federation now.
6.6. It is projected to unify three current compulsory payments to the state extra-budgetary social funds (except for the Pension Fund of the Russian Federation). For this it is planned to levy a special tax splitting the sum of revenues from this .tax to be passed to the Social Security fund of the Russian Federation, Employment Fund of the Russian Federation and Funds of Compulsory Medical Insurance. Application of unified social tax to be paid along the same rules and within the same time-frame is supposed to facilitate book-keeping and reporting for a taxpayer, to improve administrative management, to provide a better record of tax payers and make their co-operation with the control bodies easier, as well as to unify the system of responsibility for tax violations.
6.7. The Tax Code draft also provides for the reduction of numerous non-systematised tax privileges.
6.8. On the whole the new system of taxes and dues included in the Draft Tax Code provides for a little more than 30 taxes and dues instead of over one hundred currently existing. Most of the federal and regional taxes, while preserving or altering their titles to an extent, are to be modernised.
6.9. The profits tax: The determination of taxable profit finds a new approach. The tax base is determined as the margin between the revenues received by the taxpayer for the tax period and expenses connected with the production and sales of goods (work, services) during the same period, i.e. universally accepted order is introduced for determining the tax base as the profits actually received for the tax period. At the same time multiple restrictions are removed on the possibility to charge to the cost price the expenses having nexus with the profit.
6.10. The introduction of an altogether new institution for the Russian Federation is envisioned, that of a consolidated group of taxpayers, i.e. an association of Russian enterprises stepping up as a single taxpayer.
6.11. A single tax rate of 35% is introduced on the income (profit) to ensure a unified approach to the taxation of enterprises in different branches of economy. Also envisioned is the abolition of a number of privileges, particularly those concerning capital investment since a different kind of incentives is envisaged within the framework of the new tax policy.
6.12. As for the personal income tax there is going to be a reduction in the number of tax rates and a change in the range of their effect. The basic rate to be established is 12% and the increased one of 30% (for 60 million- rouble incomes).
6.13. Tax deductions (privileges) are preserved in respect of the amounts payable to the Pension fund of the Russian Federation, maintenance costs for the upkeep of children and dependants and for philanthropic purposes. Individual categories of citizens (invalids, WW 2 veterans, those who took part in clean up operations after the Chernobyl accident etc.) will be entitled to the current privileges whereas some of the above privileges will get expanded.
6.14. The Value Added Tax is to become a true value added tax by exempting all those additional amounts and proceeds which today are taxed irrespective of their not having to do with the VAT or the sales of goods (work, services).
6.15. To partially compensate for the incomes of budgets and state extra-budgetary funds falling as a result of the liberalisation of the tax system,, it has been suggested that the low tax rate (10%) be rescinded and the single rate be raised up to 22 percent. The VAT is provided for as a source of forming the federal budget (19%), the Russian Federation's Pension Fund (2%) and the road construction funds (1%).
6.16. It is supposed that the VAT will be paid on the basis of invoices. Due to the transfer to the system of invoices, the reimbursement (return) of the material production resources tax will be made not depending on payment for deliveries of these goods to the suppliers but upon receipt of invoices form suppliers (sellers) irrespective of the fact of payment for the acquired material resources.
6.17. Excises: Excises are again divided into excises on individual goods and for separate kinds of mineral raw materials. The excises on mineral resources are viewed as an element of tax on natural resources. As for home town and imported produces there will be unified excise rates and a way to calculate them.
* Exchange rate for different currencies vis-a-vis the US $ as on 31st March, 1997 are indicated in Appendix 1 (Pg. 475)
6.18. Excise rates for crude oil (gas condensate included) are differentiated depending on the mining, geological, geographical and economic conditions of their extraction.
6.19. In connection with the suggested abolition of the tax on the sale of combustibles and lubricants (25% receipts from the sales of automobile and diesel fuel oils, condensed and liquefied gas) and the abolition of export duties, effort is being made to adjust the list of excisable goods to partially compensate for the reduced incomes. The list of excisable goods includes diesel fuel and oils for diesel and carburettor engines.
6.20. A number of changes have been introduced into the tax laws already while approving the 1997 federal budget.
6.21. At the same time study of the Tax Code draft, carried out by the Accounts Chamber, has revealed a number of problematic questions, which need further additional study.
6.22. According to the judgement of the Accounts Chamber, the proposed version of the Tax Code, if implemented, will not be able to provide the state budget with necessary inflow of financial resources. At the same time the envisaged changes in the taxation system can hardly decrease the tax burden.
6.23. The draft of the Code envisages that basic tax rates are not being reduced. The profit tax rate is preserved on the same level of 35%, it is proposed to fix the VAT on the level of 22% thus abolishing the lowered VAT rate of 10%. It is also planned to introduce the real estate tax, which is to replace the taxes on enterprises property and on property of individuals as well as land tax. The upper limit of the tax rate on enterprises property, which is envisaged to be preserved until the introduction of the real estate property tax, is supposed to be increased from 2% to the level of 2.5%.
6.24. In view of all this, as well as the right of local authorities to impose their own taxes, as proposed in the Draft, the intention to ease the tax burden looks quite declarative.
6.25. The draft of the Code does not foresee any prohibition to grant of tax privilege to individual tax payers by the Government of the Russian Federation or the Ministry of Finance on the basis of special decisions of these two bodies, while experience proves, that such taxation privileges, though of exceptional individual character at first, play the role of a precedent and erode the whole tax system in the end.
6.26. The draft of the Tax Code does not contain calculations nor has nay ground to prove that the Code would stimulate the development of material production (works, services) to a new level. Cancellation of reduced VAT tax can worsen the purchase capacity of the population.
6.27. The Tax Code should be the normative law of direct action and application, as it is generally accepted in the world practice. But the Draft doesn't express it clearly. Moreover, it admits introduction of additional laws to clarify and specify the Code, which will be evidently necessary.
6.28. While making an expert study of the draft of the Tax Code of the Russian Federation, the Accounts Chamber has offerred a lot of comments and recommendations, concerning specific articles. The conclusions of the Accounts Chamber have been presented to the Federation Council, the State Duma and the Government of the Russian Federation.
7.1. The Russian Federation has a sufficiently well outlined system of state financial control. By now a draft federal law has been prepared on the state financial control which systematises and develops the practice of exercising the above control, determines its tasks, objects, the ways of its implementation and the rights of the state financial control authorities. According to the said draft law, the area of the state financial control includes control over the implementation of the federal budget and the budgets of federal extra-budgetary funds, the organisation of cash flow, the use of credit resources, the situation with the state's internal and external debts, the state reserves and granting financial and tax privileges and advantages.
7.2. Currently the state financial control, in keeping with the division of functions and powers established by the laws of the Russian Federation, is carried out by the Accounts Chamber of the Russian Federation, the Central Bank of the Russian Federation, the Ministry of Finance of the Russian Federation (the Head Federal Treasury Department and the Control and Auditing Department), the State Tax Service of the Russian Federation, the State Customs Committee of the Russian Federation, the Federal Service of Russia for Hard Currency and Export Control, the control and auditing authorities of the federal organs of executive power, as well as other organs which exercise control over receiving and expending the funds of the federal budget and federal extra-budgetary funds.
7.4. The state financial control is exercised as preliminary, on-going and subsequent control.
7.5. The preliminary control is carried out at the stage of drafting and reviewing the drafts for formation and usage of federal state funds, the on going control is carried out during the formation and usage of federal state funds, and the subsequent control draws on the results of the formation and usage of federal state funds. For the purposes of financial control, the bodies of state financial control can make, within the limits of their competence, audits and inspections
7.6. An audit is a system of obligatory control actions aimed at the documentative and actual examination of the legitimacy, expediency and efficiency of economic and financial operations and also of the legitimacy and correctness of actions taken by officials while carrying them out.
7.7. A full complex audit of financial and economic activities provides for the following check-ups; of operations with available cash; on accounting and credit operations; settlements with the federal budget and extra-budgetary funds; the safety of capital funds and intangible assets and operations with them; the safety of production reserves, material production values and operations with them; investment operations; settlements concerning wages and tax calculations, formation of primary cost; formation of financial results; the organisation and state of accountancy and internal (departmental) control.
7.8. An inspection is an isolated controlling action or the examination of the state of affairs in a certain area of activity of the object under control.
7.9. The market reforms carried out in Russia, the democratisation of economic relations and the emergence of hundreds of thousands independent business units have necessitated the creation of a special tax organ aimed at ensuring control over the adherence to the tax laws and the correct calculation of taxes, complete and timely remittance of taxes and other compulsory payments to the budget.
7.10. The organ in question is the State Tax Service of the Russian Federation founded in 1991. The State Tax Service of the Russian Federation is a part of the system of the central organs of the state government and is subordinate to the President and the government of the Russian Federation. The organs of the State Tax Service constitute a unified centralised system of control over the observance of tax laws. For the time being the tax organs, i.e. state tax inspection bodies are present in all the subjects of the Russian Federation, its regions and cities.
7.11. The Law on the State Tax Service grants the state tax inspections the following rights:
7.12. Last year there was aggravation of the problem of tax evasion. In these circumstances the State Tax Service of the Russian Federation has intensified its control over compliance of taxpayers with the tax legislation, over correctness, completeness and timelines of providing the taxes and compulsory payments to the budget.
7.13. The tax organs' main efforts were directed at enhancing efficiency of the documentary audits of major taxpayers as well as banks and enterprises engaged in foreign economic activities and of joint ventures. Measures were taken to strengthen co-operation between tax organs and the organs of the tax police, financial and other supervising bodies.
7.14. These measures made it possible to strengthen control and make up for the missing tax budget payments and financial sanctions in the amount of around 161 trillion roubles, in particular, over 79 trillion roubles to the federal budget.
7.15. However, the efficacy of the control work of the tax organs remains insufficient, the level of the recovery of unpaid taxes being still unsatisfactory.
7.16. An important place in the activity of the State Tax Service is occupied by the execution and working out of tax statements.
7.17. The organisation of tax statements is aimed at studying the quantitative aspect of the taxation area while an objective analysis of the obtained results can serve as a reliable basis for decision making with regard to perfecting the tax legislation and extending the taxation base.
7.18. In 1997 the tax statements were composed of the following: five days statements on tax-payment receipts to the federal budget on integrated indices; monthly statements on tax-payment receipts to the Russian Federation's budget system (the federal budget, the budgets of the subjects of the Federation, the consolidated budget) based on different kinds of taxes and payments and depending on the branches of economy, ministries, departments and regions; quarterly statements on tax-payment receipts to the Russian Federation's budget system based on forms of property and small - business subjects; monthly and quarterly statements on the results of tax organs' control work; monthly statements on indebted payments to the budget system based on the main branches of economy, ministries and departments and on property forms, six-monthly statements on the base of taxation drawing on the main taxes and a number of other forms of statements.
7.19. Thus, the tax statements in the current year allow for obtaining sufficiently large-scale information characterising the extent of tax receipts, the volume of dues and shortages in the most important taxes in the branch and territorial aspect, the extent of the taxation base of the main taxes, and also the results of control work on revealing the violations of the tax legislation.
7.20. At the same time the existing information base does not fully provide for needs of government financial and controlling organs in analysing the implementation of the budget and the development of its drafts. This base lacks significant indices determining the composition and structure of payers. It is difficult to outline the taxation base for individual forms of payment and the sphere of indices on the taxation of natural persons is narrow. The tax statements do not yet contain the needed information for an integrated factor-by-factor analysis of the implementation of the budget's revenue part and the reasons behind the non-payment of taxes.
7.21. In 1992, in the course of the economic reform and the decentralisation of the financial system and financial management, a decision in principle was made regarding a changeover from the bank to the treasury system of the implementation of the federal budget. The Main Administration for the Finance Ministry's Federal Treasury of the Russian Federation was set up. This decision changed drastically the technology and practice of implementing not only the federal budget but also the budgets of the Federation's subjects, i.e. it has an impact on the whole budget system of the Russian Federation. This kind of transition was caused by the necessity of developing the budget federalism, the more clear-cut differentiation of the financial flows forming the revenues of both the federal budget and the budgets of the Federation's subjects, by the need to ensure the single-purpose use of budget funds.
7.22. In this connection the main tasks of the treasury organs lie in the organisation, implementation and control over the use of the federal budget, in governing the revenues and expenditures of this budget, regulating financial relations between the federal budget and the federal extra-budgetary funds, making the short-term forecasting of the amounts of state finance resources, and also the efficient management of these resources. The treasury bodies organise and effect the registration of budget revenues and their distribution between the federal budget and the budgets of the Russian Federation's subjects and control the flow of payments in the bank sphere.
7.23. However, the formation of the federal treasury organs and the regulation of their work took more time than was expected due to a number of both objective and subjective reasons which was noted in the conclusion of the Accounts Chamber of the Russian Federation on the results of the thematic audit of the organisation and implementation of the revenue receipts and expenses of the federal budget performed by Federal Treasury's Head Administration in 1996.
7.24. An important area in the organisation of the Treasury's activity is the organisation of the system of collecting and processing information, conducting of registration and making financial reports on the implementation of the budget. To this end a five-day efficient account is being elaborated in the organs of the federal treasury on the amounts of revenues to the federal budget as well as a monthly accountancy statement on the implementation of the federal budget with regard to revenues and expenses.
7.25. An analysis of the course of implementing the budget is made on the basis of five-day statements and also the forecasting of its receipts with respect to different kinds of taxes and payments for the coming month and three months. Short term forecasts are made for expected revenues and their remittances (financing the budget's expenses).
7.26. The monthly account of the amount of receipts and expenses made in the federal budget includes the sums of the registered revenues and expenses transferred from the banking accounts of the Federal budget. Consolidated data on the regions are submitted to the Head Administration of the Federal Treasury with respect to incomes and expenses in accordance with the budget classification. A consolidated report is also made regarding the implementation of the Federal budget. It is submitted to the Government and the Houses of the Federal Assembly of the Russian Federation.
7.27. The Accounts Chamber of the Russian Federation, a standing body of State financial control, founded by the Federal Assembly of the Russian Federation and accountable to it, occupies a special place in the system of the organs of State financial control. In January 1995 the Federal law "On the Accounts Chamber of the Russian Federation" was adopted. This Law fixes the prerogatives of the Accounts Chamber as an independent body of external control over the implementation of the federal budget.
7.28. The tasks of the Accounts Chamber are as follows:
7.29. The Accounts Chamber of the Russian Federation consists of the Chairman of the Accounts Chamber, his Deputy, 12 auditors of the Accounts Chamber and the apparatus of the Accounts Chamber. The Chairman, the Deputy Chairman and the auditors of the Accounts Chamber are appointed to their posts by the Chambers of the Russian Federation's Federal Assembly.
7.30. The Chairman is appointed by the State Duma for a term of 6 years. The decision is adopted by a majority of votes of total number of deputies of the State Duma. The Deputy Chairman of the Accounts Chamber is appointed by the Federation Council for a term of 6 years, too, and this decision is also adopted by a majority of votes of total number of the members of Federation Council.
7.31. The Chairman and his Deputy must have higher education and experience of professional activity in state administration, state control, economics and finance.
7.32. Auditors of the Accounts Chamber must have higher education and experience of professional activity in the field of state control, economics, finance.
7.33. Within the limits of one quarter of the total number, the posts of auditor level can be filled by persons who have higher education and experience of professional activity in a different sphere.
7.34. When forming the auditor's cadre of the Accounts Chamber, the Federation Council and the State Duma each appoint six auditors for a term of six years.
7.35. Only citizens of the Russian Federation can be appointed as the Chairman, the Deputy Chairman and the auditors of the Russian Federation.
7.36. The Collegium of the Accounts Chamber is set up to consider the matters of planning and organising the work of the Accounts Chamber, methodology of the control and inspection activity, reports and information to be delivered to the Federation Council and the State Duma.
7.37. The Collegium is composed of the Chairman of the Accounts Chamber, his Deputy and the auditors of the Chamber. The Collegium holds its meetings as often as necessary but at least once a month. Meetings of the Collegium are deemed validly convened if attended by a majority of its members. All members enjoy equal voting rights. A decision of the Collegium is adopted if voted for by a majority of its members.
7.38. In case a member of the Collegium disagrees with a decision thereof, he is entitled to submit at three days notice to the Chairman of the Accounts Chamber a special opinion, which shall be attached thereto and be subject to publication jointly with the decision of the Collegium.
7.39. By joint recommendation of the Chairman and the Deputy Chairman of the Accounts Chamber the Collegium adopts the Regulations of the Accounts Chamber, approves the composition and contents of the areas of work, headed by the auditors of the Accounts Chamber.
7.40. In accordance with the tasks, determined by the Law on the Accounts Chamber, the Chamber's auditors are in charge of the following spheres of its activities:
7.41. Each sphere of the Accounts Chamber's activities has its own apparatus whose main link is the Accounts Chamber's inspectors. A subdivision providing for the organisational and legal as well as economic and financial activities for the Accounts Chamber has been set up.
7.42. The Accounts Chamber's activities are performed on the basis of plans approved by its Board. The focal point in the working plans of the Chamber is its control events, that is, complex inspections and thematic audits regarding the separate sections and articles of the Federal budget, the budgets of State extra-budgetary funds, the Federal organs and the organs of the subjects of the Russian Federation, individual enterprises and organisations, those of taxpayers, banks and other credit institutions and efficient control over the implementation of their Federal budget. Supplementary audits are performed on the basis of decisions of the Federation Council and the State Duma of the Federal Assembly of the Russian Federation at the request of no less than one fifth of a total number of the members of the Federation Council and deputies of the State Duma or on the ground of the decision of the Collegium of the Account Chamber.
7.43. Apart from control measures, expert examination is made of draft Federal budget and the drafts of the budgets of off-budget funds as well as of other legislative and normative Acts pertaining to issues of taxation and the budget process.
7.44. The controlling powers of the Accounts Chamber embrace all the State bodies (including their apparatuses) and institutions of the Russian Federation, the Federal extra-budgetary funds as well as the organs of local self-government, enterprises, organisations, banks, insurance companies and other financial and credit institutions, their unions, associations and other amalgamations, irrespective of the type of the entity in case they receive, remit and use funds from the Federal budget or if they either make use of Federal property or manage it and also enjoy the tax, customs and other privileges and advantages envisioned for them by the Federal law or the Federal organs of State Government.
7.45. All the organs of State Government in the Russian Federation, as well as organs of local self-government, the Central Bank of the Russian Federation, enterprises, establishments and organisations irrespective of their type and their official functionaries at the request of the Accounts Chamber are to submit information necessary to allow for its activity. Refusal or evasion of the officials of the mentioned-above organs, enterprises, institutions and organisations to submit in due time and order the necessary information or documentation at the request of the Accounts Chamber leads to fixing of responsibility as set by the legislation of the Russian Federation. This responsibility is fixed in the Criminal Code of the Russian Federation and envisages a fine, interdiction to occupy certain posts for a period, ranging from 2 to 5 years, arrest for a period from 4 to 6 months or imprisonment for up to 3 years for officials who are obliged to provide such information. A higher fine, imprisonment of up to 5 years are envisaged for individuals, holding state positions on the federal level or on the level of the Subjects of the Russian Federation. In cases, when such deeds are conjugated with concealment of crimes, made by officials of state bodies, accomplished by a group of people in collusion or an organised group or entailed grave consequences, the penalty ranges from 4 to 8 years of imprisonment.
7.46. Following the results of control measures, the Accounts Chamber communicates to the organs of the Russian Federation's State Government, to the Heads of the audited enterprises, institutions and organisations, documents aimed at taking certain measures to rectify the revealed violations, reimburse the damage done to the State and hold guilty officials responsible for violating the laws of the Russian Federation and for economic negligence.
7.47. By law the Accounts Chamber's report is to be considered within the term indicated in the above reference or, in case the term is not indicated, within 20 days' notice. The Accounts Chamber is to be notified immediately of the measures taken to implement in recommendations of the report.
7.48. In the course of conducting an inspection if instances of violations in the economic, commercial and other activities bringing direct damages to the State are noticed which require urgent preventive measures and also in the case of the deliberate and continuous non-observance of the procedures and terms for considering the Accounts Chamber's report, the Accounts Chamber is entitled to issue obligatory prescriptions to the administration of inspected enterprises, institutions and organisations as in the event of hindering the above control measures.
7.49. In the event of the repeated non-fulfilment or improper fulfilment of the Accounts chamber's prescriptions, the Board of the Accounts Chamber has the authority to decide, upon settling the matter with the State Duma, on the suspension of all kinds of financial and accounting operations of inspected enterprises, establishments and organisations.
7.50. The Accounts Chamber informs the Council of the Federation and the State Duma on the results of inspections and audits conducted and also notifies the heads of the respective Federal organs of the State Government of such results.
7.51. Special attention in the work of the Accounts Chamber is attached to controlling the tax revenues of the Federal budget, the basis of the State's finance. These measures are envisioned and performed due to the necessity of exercising control over all participants in tax and budget processes starting with the taxpayers and commercial banks servicing this process and up to the Federal tax, financial and bank bodies and so on through the "chain" of the tax process: from the registration of taxpayers to the calculation of tax and other compulsory payments to the accounts of the federal treasury.
7.52. In 1996 the complex and thematic audits of the organisation and collection of tax budget payments and of the most important problems of the tax and budget processes were conducted by the Accounts Chamber in 23 regions of the Russian Federation (including complex ones in 7 regions). The above audits addressed 12 major problems in different branches of economy, in financial structures, banks, executive bodies in the centre and regions.
7.54. As a result the sphere of measures to control tax revenues included the regions, industries and major taxpayers whose tax payments make up 40% of the total sum of tax revenues of the budget of Russian Federation. That allowed analysis and assessment, on a item-to-item basis, of the general progress of the tax process and collection of taxes in the Russian Federation, identification of specific reasons and factors of poor tax collection, negative tendencies and processes, major deviations and violations and also the most sensitive and "painful" issues of taxation.