Dmitry Medvedev visits the Federal Taxation Service
19 november 2012
During his visit, Prime Minister Dmitry Medvedev was shown a new model for tax inspection offices that employs state-of-the-art designs and the latest technology to better serve citizens. Tax offices will be equipped with information terminals that visitors will use to check their TINs and tax balance, verify contractor names and more.
The head of the Federal Taxation Service Mikhail Mishustin also showed Dmitry Medvedev a newly released iPad application that was designed by the service and can be used to submit online applications to incorporate a legal entity or a private entrepreneur.
In addition, the Prime Minister was shown how the automated GIS-based monitoring works. Mr Mishustin said that local tax authorities can use it to monitor the work of their employees in the field and the offices.
Later, Prime Minister Dmitry Medvedev spoke with staff of the Federal Taxation Service.
Dmitry Medvedev: Colleagues, friends, please accept my congratulations on your upcoming professional holiday. It turns out it was first marked 12 years ago. I don’t know how you celebrate it, but I assume that the procedure does not differ much from other professional holidays in Russia.
A few words about the business at hand. I won't say any platitudes about the importance of your work. It is obvious that money is money, and no state can live without it. No country can secure its existence without collecting taxes. This is why we are watching the operation of our tax system so closely, while your task is to ensure the collection of taxes in the required amount. As far as I know, our tax service has been doing very well in this respect, because according to available information, although it may differ from Mr Mishustin's data (Mikhail Mishustin, head of the Federal Tax Service), the collection of all taxes administered by the consolidated budget of the Russian Federation reached nearly 10 trillion roubles in 2011, which is 25% more than in 2010. This year everything seems to be…
Mikhail Mishustin: We have collected 9.2 trillion roubles in taxes in January-October.
Dmitry Medvedev: So, it is about 10 trillion roubles again?
Mikhail Mishustin: No, more than that. The amount we have collected to date is approximately 15% larger compared to the same period of last year.
Dmitry Medvedev: Indeed, figures are an important element, but they are not everything there is to it, because work, and in particular Government service, includes relations between people. On the one hand, the issue involves public relations, as lawyers say, where the parties are your service as a representative of the Government and the taxpayers, both legal entities and private individuals, for whom the payment of taxes is very important.
Therefore, the removal of administrative barriers and the use of advanced technologies are of key importance for the development of the Federal Taxation Service (FTS). Mr Mishustin (Head of the Federal Taxation Service Mikhail Mishustin) and I have just visited an average tax inspection office and seen new registration systems. I must admit, everything looks okay except for the salaries mentioned by employees. I hope everything I have been shown today will become standard practice for the FTS on the vast territory of this country – not only in Moscow and our European part but in all other regions as well.
As I understand, the FTS has more than 30 electronic services that provide information, consult applicants on taxation and business issues, and accept documents for state registration. We have seen today how an individual entrepreneur undergoes state registration. By and large this does not look worse than… At one time I assigned this task to the FTS head. I have seen how this is done in Singapore and this process has taken the same time. The only thing that we still lack is an opportunity to make electronic payments on a wide scale. I understand your colleague prepared the payment document in advance so he could show everything to me.
Mikhail Mishustin: We had this opportunity and we did not take advantage of it only because we did not want to wait for several minutes.
Dmitry Medvedev: It would take him a bit more time though.
Mikhail Mishustin: If you open an online account…
Dmitry Medvedev: Okay. All this sounds good. Based on available information, three-quarters of taxpayers can report online. This is a very high percentage, probably the best in the country. We want all federal agencies to go online but three-quarters is great. But we must press on because by creating comfortable conditions we will promote the development of our economy and make it attractive to investment. Both experts and entrepreneurs share this view. When the materials were prepared for me… I don’t know whether this is true or not but one figure stunned me. We will receive it today and will meet anyway. Eventually it will be published on your site and in the social media that will report on your meeting with me… Polls show that the share of our taxpayers that are satisfied with the performance of our tax bodies is not simply growing but reached 75% last year. If so, this is a very good figure. I think it is probably near the global level.
I am pleased to quote one more figure – I’m happy to talk about positive changes on the eve of the holidays. The World Bank has moved Russia from 105th place to 64 in its Doing Business rating for easing the administrative burden of paying taxes for companies. This is a seismic shift. At any rate, we know this is not a statistical error. We realise that foreign analysts and, I hope, our business people and other ordinary citizens note that our tax authorities are doing a better job and becoming more modern.
We face many challenges. The tax service must meet modern standards. Ongoing economic processes must be reflected in your documents and eventually in all decisions made at all levels, starting from the FTS top management and ending with tax inspections that resolve a host of tasks on the spot.
The FTS is the biggest civilian government agency. I’m not talking about military or law-enforcement bodies. It employs about 150,000 people, and this is a powerful force. The share of women is 83%. Here women and men are represented fifty-fifty but there are many more women in the FTS. Apparently, this gender balance is rooted in the history of the taxation service.
Salaries are the second item on our agenda. In fact, we have already started to discuss it. Salaries are really not very high but still a bit above the national average of 30,000 roubles per month. But this is an average figure and salaries are different in individual cases. You’ll tell me about this later.
We will also talk about housing because this is a very important issue and not an easy one for government officials. To my knowledge, about 4,500 are on the register and you are giving them subsidies. But apparently these subsidies are not enough. We should probably talk about this issue because it is on the agenda of government agencies.
That concludes my opening address. I’d like to congratulate all those present on the holiday once again and ask them to take part in our conversation. I don’t have a list of speakers, so please go ahead and take the floor. I don’t know who will be the first to speak. Mr Mishustin, would you like to?
Nadezhda Okhlobystina (head of the department for taxpayer relations of the FTS regional inspection office №9 in the Tver Region): Mr Medvedev, may I be the first to ask you a question?
Dmitry Medvedev: I’m scared. Okay, Ms Okhlobystina. Go ahead.
Nadezhda Okhlobystina: Nadezhda Okhlobystina. I work for a tax inspection office in Tver. I know you are an active user of the web. We also have many online services. Could you tell us please whether you have used them? If so, do you like them? And what can you suggest?
Dmitry Medvedev: I’m sure Mr Mishustin put you up to asking this question because he is the main driver of these processes. I don’t see anything wrong with that. On the contrary, it’s very good that you gave such a strong impetus to this work because this is how things will work in the future.
As for me using your services, I mentioned this a few times in my remarks and gave instructions to your boss. On several occasions, I watched how these services work together with Mr Mishustin. Personally, and let me be honest about it, I don’t use them because my life is very structured now. If you had asked me this question 13 years ago, I would have absolutely told you that I do, because I was in the consulting business back then and made my living working in the corporate world. These issues, just like the ones pertaining to tax legislation, were part of my job. I was actually good at them. Of course, I’ve fallen a bit behind now. All papers that I file and all the documents that I look at are fully regulated by the laws governing presidential activities or the work of Government members. There’s nothing overly complex about this, and all this information is publicly available. I can say that the actual services have become much better. Things that I saw today that are based on Apple computers are absolutely up-to-date, comfortable and user friendly. My colleagues helped me get a quick overview of them and I could see for myself that filing tax returns using such a service is very easy. I hope this is happening in real life as well. You are from Tver, aren’t you?
Nadezhda Okhlobystina: Yes.
Dmitry Medvedev: A nice city and a relatively short ride from Moscow. Be honest, do you mostly work with paper documents or electronic devices?
Nadezhda Okhlobystina: Mostly electronic.
Dmitry Medvedev: You have regular taxpayers and businesses as clients. What are they using to file tax returns?
Nadezhda Okhlobystina: Urban residents prefer electronic filing whereas rural people understandably gravitate toward paper.
Dmitry Medvedev: Speaking about the city of Tver, do you have a sense that people are changing how they file their returns and are increasingly doing so electronically?
Nadezhda Okhlobystina: Yes, people are changing. They are doing great work. We are doing a great job, too, trying to help them go paperless. Our customers like it.
Dmitry Medvedev: While we are at it, I remember filing tax returns in Leningrad when the whole process was, to say the least, not user friendly. I needed to put together a bunch of documents, then bind them in a folder and take it to a tax office ... Since I was engaged in a variety of activities, I had a fairly large number of income sources, which is not a bad thing in itself, but doing all the associated paperwork has always been a separate chore that took much time to complete. I still remember the tax inspector who took care of my returns, a nice and obliging lady. However, in order to do all this work for a busy man running several things at a time... Honestly, it took me ... I think it took me a week to do this: first, I had to collect all sorts of different papers, then make an appointment with the tax inspector, then go there and wait in line for a while and then finally sit down and talk with the inspector. How much time does it take now?
Nadezhda Okhlobystina: That depends.
Dmitry Medvedev: In your taxation district.
Mikhail Mishustin: To file a tax return?
Dmitry Medvedev: Yes, how long does it take an average taxpayer to file a return?
Mikhail Mishustin: An individual taxpayer…
Dmitry Medvedev: Sure, an individual.
Mikhail Mishustin: I think filing a tax return by mail or online… As for preparing taxes …
Dmitry Medvedev: Can regular taxpayers prepare their own taxes, or is it all Greek to them?
Remark: Of course they can!
Mikhail Mishustin: Perhaps, it is not so difficult to figure it out. Tax advice is available for all those who may need it…
Dmitry Medvedev: I like the way you put it: “It is not so difficult.”
Mikhail Mishustin: Speaking seriously, our website makes many things simple. We have a user friendly form for individual taxpayers. They can download it instantly and use handy prompts to complete it. It seems to me that individual taxpayers with whom I talk do not have many questions regarding tax returns.
Legal entities that do accounting and reporting may use one of our advanced software products – 1C. If everything is in order, they can merely upload their data in the tax return format and submit them online. It takes 15 to 20 minutes to send tax returns to a tax inspection via an operator. And that's all there is to it. Our colleagues from the World Bank were very impressed with this procedure.
Dmitry Medvedev: This is real progress.
Mikhail Mishustin: Indeed. We even had an argument because they think our legal entities need only 177 hours per year to file their tax returns.
Dmitry Medvedev: Now that we have embarked on this road, and it is the only road, it is important to complete what you have just shown me – the formation of the centres. The massive amount of information that you will consolidate is huge and will continue to grow. Thus, it is important to launch these projects. They are large and expensive, but our future lies with them and they are convenient for users.
Yulia Shilova (Deputy Head of the FTS Legal Department's Office on Litigation with Taxpayers): Mr Medvedev, I’d like to ask you a question on the same subject. The Law on Electronic Digital Signature (EDS) was introduced in 2002. Municipal bodies are actively exchanging documents online, but regular people are restricted in dealing with executive authorities. Here’s my question – will people be issued digital electronic signatures along with their passports? Thank you.
Dmitry Medvedev: Ms Shilova, this will be the right thing to do because we are now working on identification procedures to make life simpler for our people. No matter what they say, paper documents… We do realise that it’s necessary to switch over to standardised identification procedures and many decisions are designed to make this happen. By the way, I have signed a relevant document on the Government's behalf today. I’m referring to ID cards that will include everything from personal information and driver’s license to personal banking, tax status and pension payments. I think that it would make sense to include the EDS into this card as well. I’m not sure, though, because I’m not as well-versed in this subject as you are, to put it mildly. I have a feeling that we have not gone very far with the EDS in this country. Perhaps, I am missing something, but it seems that there are no major changes in this area. Am I right?
Mikhail Mishustin: A few words, if I may. The online notarial system has started developing in the past two years with the help of the Ministry of Justice. We instantly came up with a service. This is the only way to go. If we cannot confirm the authenticity of a document without a notary…
Dmitry Medvedev: You are right, but this should be a two-way street. People and companies should be also interested in obtaining this signature because if they are not, they won’t use it no matter what services you create. Do many individuals or companies in Moscow have the EDS? I believe almost all companies have it...
Yulia Shilova: Seventy-five percent of the companies in Moscow report online.
Dmitry Medvedev: How many?
Yulia Shilova: Seventy-five percent.
Dmitry Medvedev: Yes, this is the figure that I quoted.
Yulia Shilova: Speaking about…
Dmitry Medvedev: What about individuals?
Yulia Shilova: Not many individuals have an EDS because it is not inexpensive.
Mikhail Mishustin: Sixty percent of sole proprietors have one.
Yulia Shilova: Sole proprietors have…
Dmitry Medvedev: Sixty percent is not so bad.
Yulia Shilova: Most taxpayers file online. There are practically no paper-based tax returns.
Dmitry Medvedev: That’s good. Thank God we've made it. It would be good if everyone went online, but it is necessary to devise incentives for this because this should be a two-way street. This cannot be imposed from above. Go ahead please.
Vitaly Kolesnikov(Head of the FTS IT Department): Good afternoon, Mr Medvedev. I’d like to say a few words on the subject that you discussed. In general, we have fully digitalised the tax signature. We are not only sharing information with our colleagues in order to ensure taxes are worked out correctly, but we can also produce an officially signed electronic copy of any Tax Code document. We are ready for this and we are already doing so, but society is not ready to accept them.
Dmitry Medvedev: Why?
Vitaly Kolesnikov: Because there’s no law and there is no regulatory enforcement to overcome this mentality and create a law to enforce the legal validity of electronic documents.
Dmitry Medvedev: Then tell me a little more about this, because while you engage in it on a professional basis, my interest in these issues is a little more sporadic. Mr Kolesnikov, I just want to understand what it would take to make them legally valid.
Vitaly Kolesnikov: Suppose we maintain a register of legal entities. We can issue electronic statements. Moreover, we are ready to issue electronic certificates of taxpayer registration and certificates of state registration. However, the law enforcement and judicial authorities and other bodies are not willing to accept them in electronic form, although they are legitimate documents electronically signed by our officials. My question is: do you support our plans in general? Maybe we are getting ahead of ourselves in our attempts to go paperless.
Dmitry Medvedev: No, you’re doing fine. I fully support what you are doing. Some time ago I made a relatively straightforward but nevertheless true remark to the effect that a public servant who is not able to create an electronic document and is afraid to open a computer should be dismissed from public service. We do not hire illiterate government employees. Computer skills are part of modern literacy. I agree that 20 years ago computers were an exotic piece of equipment. I began learning computer skills about 15 to 17 years ago, when I realised that having these skills was a necessity. You can’t get along without computers these days. Therefore, I believe that all government agencies, including law enforcement agencies and the judiciary, need to go paperless. Moreover, all regulations should also be issued electronically at some point in the future. Perhaps a small proportion of documents, such as laws, presidential executive orders or Government resolutions, should also be available on paper for archiving, but that’s all. In general, for example, at the regional level, there’s no need for hard copies. No one needs them on paper. On top of that, they take up a lot of space to store. There’s only one question: how do we get people interested in using electronic documents? They need to be encouraged to do so, because that’s how people are. If you do not push them to do things, they won’t do anything. The vast majority of people can understand this, so we need to give all our agencies incentives to go paperless. The experience of the tax service should be used to the full, because you were the first to switch to electronic paperwork.
Igor Gribkov (Advisor to the Division of Litigation with Major Taxpayers in Manufacturing and Legal Services of the Federal Taxation Service): Mr Medvedev, I'm involved in litigations with major taxpayers and I have a legal question.
Dmitry Medvedev: Are we going to have a legal consultation now? Please go ahead Mr Gribkov.
Igor Gribkov: Mr Medvedev, the number of legal disputes has been steadily declining lately, and this has been confirmed ...
Dmitry Medvedev: Are you dealing with major taxpayers?
Igor Gribkov: Yes. And this trend has been confirmed by court statistics: the number of such disputes has declined dramatically over the past years. At the same time, the number of complex cases associated with the application of the tax law is on the increase. This has to do with the way legal relations naturally evolve. Our judicial system now has such things as judicial precedents. For example, we receive a resolution of the Plenum or the Presidium on complex issues which are mandatory for the lower courts. In this connection, I have a question: Mr Medvedev, do you think that a court case should be a good source of law in Russia, similar to the Anglo-Saxon law?
Dmitry Medvedev: I now feel like I’m back in my student years. You know, this is practically a philosophical question. When I became a law student at the University of Leningrad (in 1982), this question was framed the same way you are framing it now, but it was quite a while ago. There’s no answer to this question yet. I don’t have a clear answer, either. But I'll tell you what I think, not even as a former university professor or a lawyer, but as the current Prime Minister and former President. Our court rulings, and you are perfectly aware of this as professionals, constitute, in fact, sources of law. No matter what we may say, they are in most cases mandatory for use even if we assume that this is not how they are treated. If I understand your question correctly, what you’re asking is whether this practice should be coded in a regulation, a law or a decision by the Constitutional Court? I'm not sure if this is possible right now, but I'm also confident that we will have to do so sooner or later. I’m not sure when it will be done, but I have a feeling that the world's legal systems (I’m sure you know this as well as I do) are converging.
You mentioned Anglo-Saxon law. Fifty years ago there was a huge difference between Romano-Germanic law and Anglo-Saxon law, and the developments in this area in Continental Europe had little to do with what was happening in the United Kingdom or the United States. Now all legal institutions have become global. Europe is using EU legislation. And what kind of legislation, including tax legislation, exists here? Civil law and other legislation: is it Romano-Germanic or Anglo-Saxon? Clearly, it’s very eclectic in nature. We should not persist in trying to keep our legal system unchanged. So I believe we will have to recognise this sooner or later.
However, it remains to be seen when this will happen and who will make it happen, because this is a very complicated issue. It is also related to the progress of our judicial system, because in order to make a court ruling a source of law, we must be absolutely certain that we can produce the right decision at the right time. That’s the first point. Secondly, such a ruling will be somewhat correlated with our laws. Do you know what a lawyer, for example, a tax lawyer in the United States does? He turns on his computer and starts looking for all the rulings on similar cases that have been passed since the days of George Washington or Thomas Jefferson...
In order for a court case to become a source of law, all of us, including you, have similar opportunities. But so far we haven’t had such an opportunity. We have court databases and we can pull up guidance materials provided by plenums of the Supreme Arbitration Court or the Supreme Court, but we can’t sift through the entire database, even though it now stores a fair amount of cases. I know that they are maintaining their own databases, but we still can’t take full advantage of them.
Lyubov Shishlova (Deputy Head of the Division of Litigation with the Taxpayers of the Legal Department of the Federal Taxation Service): Mr Medvedev, I’m working with regional courts…
Dmitry Medvedev: Yes, we started talking about courts.
Lyubov Shishlova: Yes we did. My colleague has already mentioned that the number of court cases is declining, which, according to court statistics, is due to our successes in the pre-trial settlement of disputes. We know that there is such a procedure as mediation when a third party is involved...
Dmitry Medvedev: You’ve picked a tricky issue to discuss. Not football or something similar.
Lyubov Shishlova: … when a third party is involved in resolving the dispute. It's an unbiased party that helps resolve the dispute so there is not need to take it to court. We have a law on mediation, but it does not apply to taxation. I just wanted to hear what you think about pre-trial regulation, including mediation? Do you think it can be applied to taxation as well?
Dmitry Medvedev: I see. You are asking serious questions. What is your educational background, Ms Shishlova?
Lyubov Shishlova: I graduated from the Russian Law Academy of the Justice Ministry.
Dmitry Medvedev: I see. Well, then that's quite a professional position. I can give you some general considerations about this issue, because to be honest I haven’t really thought about it. In and of itself, mediation has been used from the very start to settle private legal or civil disputes. And that's fine, because two equal parties choose a mediator to resolve their dispute without going to court where neither party has any power over the other. As we know, tax relations are based on a different principle. These are vertical rather than horizontal public relations based on the subordination of the parties. The state has the right to claim, whereas a citizen or a legal entity has a duty to pay the appropriate amount or pay a fine. In this regard, mediation does look rather specific, because frankly I do not really understand the margin of appreciation of the mediator. What will he be bound by? When you come to him to settle your civil dispute or an economic conflict, you give him some of your powers and ask him to resolve the dispute, saying that the other guy wants you to pay him 100 roubles whereas you believe you owe him only 50. The mediator looks into the case, scratches his head and says: “All right, let’s make it 75 and be done with it.” How will things work out in this case? You want to give the mediator the right to determine (hypothetically) the amount of the fine to be paid? I think this is a straight path to corruption, because the sides will try to bribe the mediator. Perhaps this is doable in some instances - I do not consider myself particularly competent in this area. I just thought that mediation isn’t a good choice for financial and fiscal disputes. What’s your take on it, by the way?
Lyubov Shishlova: I agree that it can be applied, but only to specific cases, perhaps even specific taxpayers. I also believe that mediators in the area of taxation should have in-depth professional knowledge...
Dmitry Medvedev: That’s absolutely correct.
Lyubov Shishlova: … because they are dealing with serious issues.
Dmitry Medvedev: The only issue, Ms Shishlova, is the authority of this settlement mediator because your relations are public. If the mediator waives some rights of the state, no state will agree to that because some taxes will not be received as the result of the mediator’s actions. If these are just some of the disputes that are not directly related to payments, or to specific or extra sums, then this is possible, only it needs some review… In any case, pre-court settlement is no doubt useful, the issue is about the principles.
Mikhail Mishustin: A couple of words about pre-court settlements.
Dmitry Medvedev: Please, go ahead.
Mikhail Mishustin: Mediation is, of course, fine. There are institutions that apply it, and there is the so-called open-hand rule when tax authorities in some countries can conclude agreements. But I absolutely agree, Mr Medvedev, that this will not be so simple to introduce here…
Dmitry Medvedev: We are not mature enough, to put it bluntly.
Mikhail Mishustin: Yes, I would like to say a couple of words about the results of pre-court auditing. All actions by the tax service, like office and field checks, are today subject to obligatory pre-court settlement.
Mr Medvedev, today we see that the number of trials won has increased by 30%. And the number of court cases by 77 %…
Dmitry Medvedev: By the way, who is the winner in percentage terms: the tax authorities or the Federal Tax Service?
Mikhail Mishustin: Already 63.5.
Dmitry Medvedev: I mean percent.
Mikhail Mishustin: 63.5%.
Dmitry Medvedev: Roughly speaking, two thirds?
Mikhail Mishustin: About that. Sometimes 70%. Our current situation is …
Dmitry Medvedev: And previously?
Remark: By the amount.
Dmitry Medvedev: By the amount?
Mikhail Mishustin: Before, it was 40%. For over two and a half years. The case loads of the High Arbitration Court and arbitration tribunals have halved and the contested amounts have gone down by 40% over the past three years. Today’s figure is 177 billion roubles. Previously, it was 300 billion.
Dmitry Medvedev: Yes, by the sums. I remember deciding at the Arbitration Court’s request to increase the relevant sums. So that the appropriate structures were not weighed down with petty cases. I do not know how adequate these sums are, but in any case it is clear that we have increased the minimum size of claims upheld in court.
Mikhail Mishustin: There are fewer disputes.
Dmitry Medvedev: Yes, fewer. And this is better for the courts because the quality of case examination is higher for obvious reasons and the procedure is simpler for you.
Sergei Arakelov (Deputy Head of the Federal Taxation Service): The number of disputes has halved over the past three years, according to the High Arbitration Court statistics… This is due to the pre-court obligatory procedure for dispute settlement. The current pattern is that disputes with legal entities are going down by 20% every year. This is very positive, in our view.
Dmitry Medvedev: I absolutely agree. That is indeed very positive. And incidentally, the tax service has been winning an increasing number of cases recently – and this is a pretty good indicator because it means the tax inspectorates are proving their claims and showing these were not trumped up cases.
Sergei Arakelov: There are a further 12 criteria. When we are asked why the tax service undertakes a field check (and this happens quite often), we have all the criteria to hand. In particular, the average tax load on a sector for such a company is a third and this is why they come to it, or it is connected with some other things.
Dmitry Medvedev: Well, the main thing is that people are happy.
Olesya Tkach (chief expert/specialist in the division concerned with transfer pricing management and international cooperation in the Federal Taxation Service): Good afternoon, Mr Medvedev. We are now preparing a forum on tax administration for the Organisation for Economic Cooperation and Development, which will meet in Moscow in May 2013. This is going to be the largest gathering of over 40 heads of the world’s tax administrations. We are proud that out of 20 bidders we were the ones chosen to hold the forum in Moscow in 2013 to cover innovations in tax administration. Generally, I want to say that the Federal Taxation Service is a worthy figure in the international arena.
Dmitry Medvedev: I said as much.
Olesya Tkach: People travel to us to study, even our American counterparts come to learn from our experience. Our rating is: Doing Business… We have raised the level…
Dmitry Medvedev: I just quoted exactly that.
Olesya Tkach: But it is very difficult to break down some stereotypes. We need a systemic approach to improve Russia’s international image. That could be very helpful in our work. And what is happening at the government level now? What is being done to ease the work of the staff from the international divisions?
Dmitry Medvedev: Here is what is being done at the government level: the Prime Minister has come to visit you and is listening to your views about the best ways of making the tax system more modern and improving the efficiency of the tax service. This is what is being done at the government level. Also, quite decent money is being invested in the development of our tax service.
Now we will discuss salaries, because this is also a very important factor, whatever people say. Speaking about funds for development, they are available and penciled in for the three-year budget and in the next year’s budget. In this sense, to be fair, the tax service has no cause to complain about lack of fiscal attention from the state. Why? Because we see how important it is for our economic development.
I think it’s good, Ms Tkach, that you so actively work with foreign business people, that they meet and even consult with you, that they come to learn something, and that you are busy with OECD projects. This is very good; this is the proper attitude towards the business climate in this country. I wish you success.
Olesya Tkach: Thank you.
Mikhail Mishustin: Can we hear from somebody from the regions on salaries? We discussed this issue, do you remember?
Dmitry Medvedev: Yes, this is what I’ driving at. Please go ahead.
Anna Prokhorova (state tax inspector of the desk audit section at interregional inspectorate No. 3 for the Tver Region of the Federal Tax Service of Russia): Mr Medvedev, excuse me, let me ask a question…
Dmitry Medvedev: Before asking your question, Ms Prokhorova, tell us why you decided to work in the tax service and whether you like the job. I just want to know, and then you can ask your question.
Anna Prokhorova: I took a job in the tax service… I wished to work there. To be honest, I like this work very much. I’m proud that…
Dmitry Medvedev: Where did you graduate from?
Anna Prokhorova: Northwestern Technical University. I’m proud that I work here. When they ask: What do you do? I am proud to answer: I work in the tax service.
Dmitry Medvedev: I’m glad to hear that.
Anna Prokhorova: But I’d rather not answer any questions on salary.
Dmitry Medvedev: Because you don’t want to talk about it?
Anna Prokhorova: Because in effect the salary compared to… Even my friends working in other agencies, and [the salary] is significantly lower than…
Dmitry Medvedev: In the regional and local agencies?
Anna Prokhorova: Yes.
Dmitry Medvedev: Unfortunately we have this problem in all the regions and even in Moscow, too. So what is your question?
Anna Prokhorova: Does the Government plan to increase our salaries?
Dmitry Medvedev: Excellent! This is a complicated question. But you are right in fact. We were expecting this question sooner or later. What can I say? Of course, we should raise the salaries in the Federal Tax Service – we just discussed this with your boss – it’s necessary to increase salaries at state agencies because… no matter what people say, anybody representing the authorities should, first, be self-confident. Their salaries should help them resist certain temptations that come with state service. We realise that a public official will never have a salary similar to the salary of a businessman. But everybody chooses what they are interested in. Some choose public service. It offers some advantages. Some people opt for business, and this offers some advantages, too. And these positions will never coincide – they do not coincide in other countries either. But we should raise this salary, and the salary of those working in the tax service to a reasonable level, partly because you work with people who are paying money to the state. This is first. This is a very complicated job; you know this better than anyone. Second, you deal with considerable sums of money. Anyone entrusted by the state to deal with the public assets should feel protected.
This is not solely an issue of salaries that we will have to raise – we will go back to this issue, we will discuss this subject next year – this is also an issue of social standards for labour. Because we can raise salaries – you realise that we cannot raise them 5 times over for obvious reasons – but to resolve the housing problem we need a social package enabling us to do this, including here in Tver. Are you able to receive a flat in Tver or you aren’t? Tell me honestly.
Anna Prokhorova: No, I have no such option in Tver.
Dmitry Medvedev: Can you get a subsidy?
Mikhail Mishustin: Can I ask a boss? How many subsidies have you got in Tver?
Andrei Fyodorov (Head of Tver Region Directorate of the Federal Tax Service): For one flat…
Mikhail Mishustin: For one flat, for a year.
Dmitry Medvedev: Do you come from Tver?
Mikhail Mishustin: He is the Head of the Directorate.
Dmitry Medvedev: The Head of the Directorate. How many employees do you have?
Andrei Fyodorov: Fifteen hundred.
Dmitry Medvedev: Fifteen hundred including you.
Mikhail Mishustin: For how long?
Andrei Fyodorov: This year.
Dmitry Medvedev: For the first time. And how many subsidies have been extended through the system?
Mikhail Mishustin: 109 million roubles. Last year they added over 400 million roubles.
Dmitry Medvedev: No. How many housing subsidies have been extended through the system?
Mikhail Mishustin: Approximately 109 million roubles worth.
Dmitry Medvedev: No, I mean the number of the subsidies themselves. I mean 100, 200, 500 or 1000 subsidies?
Mikhail Mishustin: No, we have standards depending on the floor area and so on for an individual to get a subsidy. In Moscow, an average subsidy is about 4 million or 5 million roubles; and 1.5 million or 2 million roubles across Russia. Ms Petropolskaya, how many subsidies have been extended in your region?
Anna Petropolskaya (Deputy Head of the Ivanovo Region Directorate of the Federal Tax Service): Over the course of this programme, two people, two civil servants got housing over a period of more than three years .
Dmitry Medvedev: A subsidy or housing?
Anna Petropolskaya: They have already purchased housing. Two are in the process, and two have received housing. I’m the chairperson of the sub-commission who registers civil servants.
Dmitry Medvedev: What conditions are needed for this subsidy? It’s curious. I don’t mean the amount, I mean the requirements for extending the subsidies.
Anna Petropolskaya: One employee got the subsidy under Section A, that is, he had no housing at all. The second employee purchased a flat because the floor area of his residence was less than 15 square metres per resident.
Dmitry Medvedev: I see.
Anna Petropolskaya: That is, under Section A and…
Dmitry Medvedev: I see. This is the criteria for registering in your system. But the subsidy itself is extended on what conditions?
Anna Petropolskaya: The tax service distributes it, there are set conditions. Each region has a rating.
Remark: What is there to distribute? 109 million roubles!
Dmitry Medvedev: That’s nothing, I absolutely agree.
Mikhail Mishustin: The fact is that total allocations of the federal targeted programme Housing worth over 2 billion roubles are distributed disproportionally to Government employees. We have said this repeatedly. It is not clear why the tax service is getting only 109 million roubles.
Dmitry Medvedev: This is a question… Well, I agree, this is a logical question…
Mikhail Mishustin: I think it’s not the amount as much as it should be fair so that Government officials…
Dmitry Medvedev: And how many do you think you need? Have you calculated how many subsidies you need?
Mikhail Mishustin: Yes, we have analysed it. We need about half a billion per year…
Dmitry Medvedev: You should calculate the funds that are needed to resolve this problem within a certain period, say over 10 years or 15 years, in order to try to resolve the problem under the system, the number of young people (mostly young people are represented here) and rationalise it with real demand, because not everybody needs a flat…
Mikhail Mishustin: Mr Medvedev, we can prepare this. We know the current figures… There are 4,000 people in the queue.
Dmitry Medvedev: How many are the people in question, do you know that? How many are in your system? You have 154,000. How many people need flats? A queue of 4,000 is nothing, because the queue was made at a certain time under certain rules.
Mikhail Mishustin: We looked into the approximate percentage. On average, 20%-25% per region need housing…
Dmitry Medvedev: That is, a quarter.
Mikhail Mishustin: Yes, a quarter, which is…
Dmitry Medvedev: Come on, add it up, it’s at least 30,000 - 35,000 people throughout the system.
Mikhail Mishustin: Yes, approximately that many.
Dmitry Medvedev: So, I propose that this discussion leads to a practical decision. We must determine the volume of funds, with due regard for inflation, the real economic situation and forecasts, which you’ll need, say, 10 years from now to resolve this issue, considering a constant number of people who will need housing. If you are saying that the average figure for the tax system is 25%, then this is what we should proceed from.
Speaking of housing, we’ll still have to test this plan in all the regions because we have only started to implement it. We had a different system before, but it is no longer used, as we know, because the distribution of free housing is a thing of the past. Therefore, we need to test this plan with the tax agencies and other government organisations that employ civil servants and hence have certain resources.
Yekaterina Makarova (Head of the Federal Tax Service’s department for the Lipetsk Region): Mr Prime Minister, I have one more question, about cutting the number of civil servants.
Dmitry Medvedev: I bet it was your boss who put you up to this question!
Yekaterina Makarova: Not at all. I mean that this is a painful issue for many of my colleagues who are present here.
Remark: You said we could ask any question.
Dmitry Medvedev: Yes, any question.
Yekaterina Makarova: Mr Medvedev, I want to speak about the Lipetsk Region. At this point…
Dmitry Medvedev: How many people do you employ?
Yekaterina Makarova: At the beginning of the reform, we had 1,147 people. By 1 January 2013, we will have 888.
Dmitry Medvedev: Is that enough?
Yekaterina Makarova: No, that’s not enough. We are reducing the number of personnel by 23% or 256 people, some of them very good professionals and people with experience. This will greatly complicate our work with the taxpayers, because we are closing tax inspection offices and leaving only the territorial branches that people from a given district can use. But this is not enough, even though we are increasing…
Mikhail Mishustin: How many tax inspection offices do you have?
Yekaterina Makarova: We’ll only have nine such offices and 13 territorial branches.
Dmitry Medvedev: Ms Makarova, let’s be honest with each other. On the one hand, this reduction is considerable. But on the other hand, you are not completely satisfied with all your employees, some of which are below the mark, for various reasons. I’m going to ask a simple question, and I want an answer. Would it be better to optimise the system, keeping the best employees and maximally introducing modern technology, raising salaries and resolving the housing issue as we have been discussing? That is, keep fewer people who would do the necessary amount of work, because anyone can find an argument for increasing the staff to 1,500, but…
Yekaterina Makarova: Mr Prime Minister, I want to say above all that bad employees do not last long with us: they are not satisfied with the low salary we pay and hence seek employment with business, with commercial organisations, and so we keep only those who…
Dmitry Medvedev: I am not asking about bad workers, but about efficient ones...
Yekaterina Makarova: Yes, the efficient ones. At this point we may be lacking the tools that would allow a smaller staff to work more efficiently and to fulfil all of their tasks. This is why I am firmly asking you to review this issue and adopt a new decision on the Federal Tax Service, possibly as an exception.
Dmitry Medvedev: Yes, Mr Mishustin is definitely not involved. I see this now. A few things: Firstly, I believe that we must try and accomplish these objectives with the help of efficient workers and by streamlining the number of Federal Tax Service employees. We must pay more money and, at the same time, cut jobs. This is the first aspect. Secondly, it is very important that the new technologies we are discussing are introduced in real life, rather than on paper. This will enable you to accomplish various objectives using simpler technological methods. And thirdly, the Head of the Federal Tax Service has already submitted the relevant document to me. I have instructed the relevant parties to reassess the process of the job cuts and I have instructed the Deputy Prime Minister and the Minister of Finance, so I am waiting for their proposals.
Remark: Thank you, Mr Medvedev.
Yevgenia Dyomina (Chief Specialist at the Methodology and Information Support Department of the Transfer Pricing and International Cooperation Directorate of the Federal Tax Service): May I ask one more question?
Dmitry Medvedev: Please do.
Yevgenia Dyomina: It is not linked to the previous questions but deals with the recent changes in tax legislation. Two new laws, on transfer pricing and on the consolidated group of taxpayers (CGT), came into force in 2012. On the one hand, it turns out that major holding companies can calculate and pay corporate tax in line with their respective consolidated tax bases. And on the other hand, control over market prices has been established. In our opinion, this is fair because it promotes the redistribution of the tax base from regions with high incomes to regions where the workforce and the main assets of a CGT member are located. What do you think about this trend?
Dmitry Medvedev: Look, this sounds like a tax seminar. Colleagues, I estimate this trend in various ways because I don’t work for the Federal Tax Service or the business community. And you know where I work. Why am I telling you this? Because, if I understand you correctly, Ms Dyomina, you just said that you consider the system of redistribution specified in these new regulations to be fair …
Yevgenia Dyomina: Yes.
Dmitry Medvedev: I won’t conceal the fact that many people have come to me who consider this system extremely unfair, and who believe that it should be abolished, and this includes many governors and certain other people. Why am I telling you all this? Because there is no system that is inherently fair or unfair, we all realise this, we are not doing arithmetic, and we are not simply transferring money from one pocket into another. This is a matter of regional budget provision levels, of addressing socioeconomic issues and ensuring a fair distribution of the revenues base , so this issue will never be completely resolved. And there is no ideal tax system. We realise this. The entire tax system is a “living organism” and it always has been, is and will be subject to change. On the other hand, we are proud of the fact that our system is moderately conservative, that we don’t reshuffle it like a deck of cards every year, and that we don’t create a multitude of problems.
Our system is very conservative in terms of individual income tax. I always hear people say that it’s high time we introduced a more progressive system. They also come and ask me about this. I promptly said “No” because we need to assess the socio-political and economic consequences of this transfer pricing system and the conversion to a new system. I will be able to tell you whether we should retain or modify this system only after these assessments have been made. You are also a criterion of these assessments. All right?
I have one question. When I congratulated customs officers on their holiday, I noted that everyone was wearing a uniform, and that the Head of the Federal Customs Service had no uniform. To this, your colleague Andrei Belyaninov, Head of the Federal Customs Service, replied that he was always in uniform and in good shape (Word play: В форме means “In good shape” – Ed.). So do you have a uniform?
Mikhail Mishustin: Yes I have, Mr Medvedev. My uniform was made in 2000, but I have not ordered a new suit yet.
Dmitry Medvedev: I see. All right, order a new suit then. I will not force you to attend the Government meeting in uniform, the way I forced Belyaninov. But you can wear a uniform, if you want to.
Friends, colleagues, I am addressing you this way because you are all top-level specialists. You are economists and lawyers. I believe that your work is very interesting and very difficult and should indeed be adequately assessed by the state. We will improve the system of relations in the tax service, and naturally also improve wages, social payments and the entire social package.
But the most important thing is to create a modern system. To be honest, I am very happy to see that so many young people who are extremely well-versed in their respective fields are present here in this auditorium. Although I don’t know what final decision on the number of Federal Tax Service jobs I will make, this does not prevent me from congratulating Ms Makarova on her birthday. Yekaterina Viktorovna, all of us would like to congratulate you and to wish you every success and good health.
Yekaterina Makarova: Thank you.
Dmitry Medvedev: I would also like to congratulate all of you. Please celebrate well, but within reason, please don’t overdo it.