Preferential system for participants in business transactions to receive self-securing tax benefit

About the author:

Andrey V. Ilyin, Cand. Sci. (Econ.), Associate Professor, Department Constitutional and Municipal Law, Siberian Institute of Management — A Branch of the Russian Presidential Academy of National Economy and Public Administration, Novosibirsk, Russia; ilinav2007@mail.ru, https://orcid.org/0000-0002-7257-2978

Abstract:

This article studies a set of tax relations, in which the tax base or tax is reduced by the amounts which are accrued (paid) by the taxpayer to the counterparty and which are a tax benefit. Such taxes are systematically used by taxpayers to reduce tax liabilities by involving problematic counterparties in business transactions and artificially increasing tax benefits. This research aims to develop a preferential voluntarily applied system of self-sufficiency of taxpayer’s tax benefit for small and medium-sized businesses, stimulating thus organizations and individual entrepreneurs to refuse fictitious business transactions. The author has formulated the conditions for the application of this system, a set of incentives that provide competitive advantages to taxpayers applying it. The developed system aims at reliable tax declaration of business transactions by the taxpayer, a choice of law-abiding counterparty, transparency of business activities, and open interaction with the tax authority. The results show the importance of providing organizations and individual entrepreneurs with an opportunity to choose between different institutional regimes in taxation, as well as involving small and medium-sized businesses in the process of reducing fictitious business transactions, thus, decreasing the tax burden for them.

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