President of Russia Vladimir Putin: Good afternoon.
Let us start with the traditional question, the most basic one –tax revenue and tax collection for last year and for the first months of this year.
Head of the Federal Taxation Service Mikhail Mishustin: Mr President, we have summed up the final 2018 results – the consolidated budget received 21.3 trillion rubles, which is 23 percent higher than in 2017.
Vladimir Putin: Almost 30 percent.
Mikhail Mishustin: 23 in the consolidated budget and, quite right, 30 in the federal budget. Thus, 2018 was the peak year of this five-year period. In fact, taking into consideration all the budget-forming taxes, this trend continues into the first quarter of 2019. I do not mean the growth is 23 percent – the consolidated budget grew by 12.2 percent compared with the first quarter of 2018. But if you look at the main types of budget-forming tax revenue, profit tax grew by 14.1 percent, personal income tax by 7.8 percent, which is 1.7 percent above nominal wage growth – approximately 6.1 percent in January and February.
The growth of insurance premiums has also been notable at 10 percent. And the VAT – it has been showing a fairly steady collection trend for many years – is up 11 percent.
Vladimir Putin: What about the minerals extraction tax?
I am asking because we are in the process of a tax maneuver. How much revenue has the minerals tax generated?
Mikhail Mishustin: We collected 1.478 trillion in minerals extraction tax in the first quarter of 2019, up 15.8 percent from the corresponding period, the first quarter of 2018.
The most important thing is that tax revenue is sufficiently stable; with the indicators that we have, we can see that they fit perfectly with the macro projection given to us. All is going according to the plan.
It is also very important that many companies have legalised their economic activities. In fact, we have recorded a minimum number of companies that can be described as fly-by-night operations with signs of fictitious activity. They account for less than 5 percent of the total number of operating businesses. There are around 4 million legal entities currently in operation, and they account for about 187,000. So it can be said that the use of fly-by-night operations in the activities of legal entities is becoming a thing of the past.
Vladimir Putin: What about the self-employed? A special tax regime was introduced in pilot mode in several regions: Moscow, Moscow Region, Tatarstan.
Mikhail Mishustin: Yes. Kaluga Region as well. The experiment is progressing. We have a lot of people, over 60,000 professionals who have voluntarily registered as self-employed taxpayers.
Vladimir Putin: Is that the number in these regions?
Mikhail Mishustin: In these regions, yes. The leader is Moscow, followed by Moscow Region, then Tatarstan, then Kaluga Region. In fact, we already have more than 3.5 billion rubles accounted for – the turnover of the registered participants in this experiment, meaning the so-called legalisation is underway. We believe that the experiment is progressing quite successfully.
We are also working with online platforms, with aggregators that provide services, such as Yandex.Taxi. Sberbank along with many others, and our website and mobile app have this function for those who officially register: they create their own window and immediately become a user of any aggregator system. We will report to you on the results of this experiment. Many regions are asking us to expand the scope of this experiment; many want this opportunity to be made available where they are as well.
Vladimir Putin: Is the number of cash registers increasing? And how do people use the benefits available to them when purchasing cash registers?
Mikhail Mishustin: The number of cash registers is increasing. On average, the pre-reform figure has doubled. We have more than 2.3 million cash registers in the country and more than 800,000 legal entities that have installed them.
I can say that this technology has become popular. Business owners also like it, because they can keep track of what is going on, they have an online system. And what is very important, many today are counting on us to cancel tax declarations, as we promised, for companies that use cash registers and a simplified tax system. Such initiatives are being prepared. We are currently working with our information systems. Our taxpayers are very active.
As for benefits, generally, they are being used quite actively. We will present the figures to you when we process all the data, we will give you the number of those who took advantage of this benefit. It was 18,000 before.
Vladimir Putin: Good.
Mikhail Mishustin: I would like to say a few more words about our work with major taxpayers. Over the previous year, we have registered extraterritorially eight interregional sector-based tax inspectorates. These are for the largest taxpayers, with turnover exceeding 35 billion rubles. The economy is changing. We have established such interregional inspectorates in several categories, such as the digital economy, transnational companies, and foreign companies that have contributed more than 50 percent to the authorised capital of Russian companies. Importantly, they provide for taxes to be administered on an extraterritorial basis. This means the company can use its legal entity account on the system and not visit the tax inspectorates for any services or issues.
Another important form of interaction, tax monitoring, is becoming increasingly popular. We have recently reported to the Prime Minister that as many as 44 of our largest companies had agreed on such tax monitoring with the tax inspectorate. It is a special form of interaction with the tax service, without on-site tax audits in exchange for complete transparency of the major taxpayers’ accounting systems. We can actually follow our large companies’ operations online. So today, these companies contribute about 12.5 percent of the federal budget’s tax revenue.
The Prime Minister instructed us to expand this experiment. We believe this gives tax certainty to companies, and we hope that it will be convenient enough for our taxpayers, because in fact their interaction with the tax inspectorate is reduced to a minimum if everything is in order in terms of risk criteria.
In conclusion, I would like to report to you on our system, which went into commercial operation. It is a unified system of civil registration operated by the Federal Taxation Service since October 1, 2018.
Until recently, people had a lot of problems if they needed some official letter or certificate, and even had to visit the office where their birth was recorded. Today, a single cloud platform has connected virtually all the registry offices in a single chain. Moreover, their number has decreased from about 6,500 before the reform to 4,200. Today, this technology is absolutely centralised. We have already registered around 2.7 million vital records since October 1, 2018. We are also developing a system with the Federal Statistics Service for federal executive authorities to access this information through interdepartmental electronic interaction. Rosstat, in turn, interprets it as new forms of statistics, now combined in a unified registry office.
Vladimir Putin: Good. It goes back about eight years, doesn’t it?
Mikhail Mishustin: No, right now, we started working online since October 1, 2018, but if everything goes well, a retroconversion from 1926 will be completed in the next 2.5 years. We will need to process, digitise and enter into the system the vital record archives. Russian regions are engaged in this work in accordance with the adopted legislation. I hope that this will also become a good basis for a single population register of the Russian Federation.
Vladimir Putin: Good, thank you.