Voluntary whitewashing of IT imports triples the budget revenues

In 2015, distributors paid 27 billion rubles in customs and tax charges.
20 december 2016
Media: Vedomosti
Author: Pavel Kantyshev

Добровольное обеление IT-импорта утроило доходы бюджета

Early in April of last year, Russia’s largest IT distributors signed the so-called white import charter; they agreed to proceed to transparent deliveries of electronics into Russia. The companies agreed to monitor the market and to identify the players dodging transparent declaration of goods being imported, or evade paying taxes. As  a result, in 2015, customs and tax payments in the electronics segment rose up to 27 billion rubles, which is a triple growth compared to 9 billion rubles received by the budget in 2014, as Vedomosti was told by an official of the Federal Tax Service (FTS).

The companies made a decision in favor of self-regulation, as the government did not always have enough resources to keep the market under control, as Nikolay Komlev, the president of the Association of Computer and Information Technology Enterprises (ACITE), told Vedomosti. According to Mr. Komlev, the ACITE had urged the market for a few years to whitewash imports, and the process accelerated late in 2014, when the FTS joined the efforts. The service’s representative admits that industry-specific associations monitor the cleanliness of the market and inform the FTS on possible risks. The self-control that emerged in the industry acted as a catalyst of its transparence, according to the representative of the service.

Some major distributors of IT, household appliances and electronics constitute “a cloud of small firms with colossal flows, with low prices of imported products, shady schemes for importing equipment and having it pass customs clearance”, as the FTS deputy chief Daniil Yegorov explained last year. Owing to understatement of import prices, the budget under-received the VAT and import duties, whereupon the goods were going through a chain of firms, one of which would not pay the VAT, with the price eventually “restored” at retail.

The ACITE can testify an improved situation with understatement of price for 22 commodity groups of IT imports, including laptops, tablets and smartphones, servers, desktop personal computers, as well as computer components and automotive electronics, Komlev says. According to his account, in some categories, it was possible to radically reduce the grey imports; e.g., if last year half of the servers were imported into Russia, with their price understated, which resulted in lower customs charges and paid taxes, by the summer of this year the share of such products fell to 2%. As for the categories of smartphones, tablets and personal computers, legal imports accounted for a half of them, too, whereas in 2016, the ACITE found not a single violation, as Mr. Komlev noted with satisfaction..

Convincing arguments

In autumn of 2014, having studied an operational arrangement of one of distributors, the taxmen met its chief executive and laid out a huge map, which depicted a diagram of a cloud of firms, through which deliveries and financial flows were running, Mr. Yegorov, an FTS official, explained. Having examined the map, the distributor’s owners agreed to assume a different operational arrangement; as a result, the company was additionally charged with more than 1 billion rubles in tax payments.

The largest share of “grey” imports is still accounted for the category of automotive electronics (radar devices, dashboard cameras), which the ACITE only began to address in summer. Mr. Komlev also mentions a serious problem with trade markets, where computer components, automotive electronics and accessories are mostly sold, which are imported into the country with gross violations. This view is shared by Pavel Surin, the procurement director of Marvel-distribution.

The fact that the market has become much whiter is also confirmed by Aleksey Kalinin, the president of the OCS distributor, Filipp Gens, the vice-president of the Lanit holding (who owns the Treolan and DiHouse distributors), Aleksey Abramov, the chairman of the board of directors of Merlion, and Mr. Surin (Marvel). According to Mr. Kalinin and Mr. Abramov, today the market is 90% transparent. Before, the state would only receive 20-25% of the payments due, Mr. Abramov estimates. With reference to the international practice, Mr. Kalinin doubts that this figure could in principle exceed 95%.

Since January 1, 2015, the companies have been obliged to submit tax returns in electronic format, which makes identification of underpaid taxes much easier, Mr. Surin says. Raising the efficiency of IT systems of the FTS, where transactions and delivery chains are displayed, does indeed contribute to whitewashing, as Mr. Komlev agrees. In his words, that is why following the inspections the FTS is able to charge additional tax payments. On examples of particular inspections, the ACITE and major distributors explain to other market players and their business partners that these will have to pay anyway, so it is better to operate transparently straight away, Mr. Komlev says. The cleanliness of deliveries means no risks to incur, Mr. Kalinin (OCS) agrees.

Many of the Marvel’s partners were anxious that adoption of the charter would cause a growth of prices of products, Mr. Surin argues. However, he is sure that the price growth prices was affected more by a variation in the ruble exchange rate. A source of Vedomosti in one of major retailers agrees. When the business started proceeding to transparent arrangements, the prices rose, Mr. Abramov (Merlion) remarks. At the same time, Mr. Kalinin (OCS) says he has noticed no considerable change of prices.

As Gens, Abramov and Surin agree, there still remain companies who prefer to dodge. According to Mr. Surin, for some companies, tax “optimization” makes the only competitive advantage.

As an official of the tax service observes, it cannot be claimed that the FTS’s appeal to stop underpaying taxes for obtaining unfair competitive advantage was heard by all the market players. As for those who remained deaf to this call, they are “dealt with individually”, he said.