Digitalization of universal excise tax administration in the EAEU countries: innovative approaches and harmonization problems

Shamaev Semen Aleksandrovich ORCID: 0009-0006-5542-2632 Postgraduate student; Department of Taxes and Tax Administration; Financial University under the Government of the Russian Federation Chief State Tax Inspector; Federal Tax Service of Russia No. 7 in Moscow 26 Velvety ave., Tula, Tula region, 300910, Russia semen220999@gmail.com Other publications by this author

Introduction

Universal excise duty is a form of indirect tax levied at all stages of the creation of goods and services. In the countries of the Eurasian Economic Union (EAEU), this role is performed by the value added tax (VAT). It ensures the receipt of the bulk of budget revenues and serves as a tool for regulating domestic and cross-border economic relations.

It should be noted that in Armenia and Kyrgyzstan, other forms of universal excise tax are applied simultaneously with VAT, such as turnover tax and sales tax, which partially replace VAT and income tax for certain categories of taxpayers. In Armenia, the turnover tax is used for individual entrepreneurs and small businesses, with the option to choose between this tax and the VAT system. The rates range from 1.5% to 10% depending on the type of activity (Tax Code of the Republic of Armenia). In Kyrgyzstan, the sales tax regulates transactions with goods and services, with rates ranging from 1% to 5%, depending on the form of payment (the Tax Code of the Kyrgyz Republic).

These taxes are focused on the domestic market and practically do not affect cross-border transactions. In Armenia, the turnover tax does not apply to export operations that are subject to zero-rate VAT. In Kyrgyzstan, cross-border transactions are also subject to VAT in accordance with EAEU regulations.

A comparison of these tax revenues with VAT revenues shows their limited fiscal importance. In Kyrgyzstan, sales tax revenues for the last reporting period amounted to 617.6 million soms, which is significantly lower than VAT revenues of 2,750.7 million soms ^[1]. In Armenia, turnover tax also generates lower revenues compared to VAT, which remains a key source of tax revenue ^[2].

An important factor in the successful development of the universal excise tax is the digitalization of tax administration — the introduction of information technologies and automated systems to increase transparency, minimize the tax gap (deviation between planned and actual tax collection rates) and improve interaction between taxpayers and the state. In the EAEU countries, digitalization is aimed at increasing tax collection through automated controls, removing barriers to cross-border trade, and reducing administrative costs.

Digitalization of VAT administration is considered as a necessary condition for increasing the transparency of tax accounting, improving tax collection and removing barriers to mutual trade. Despite the successes in economic integration since the creation of the EAEU in 2015, differences in approaches to taxation, the complexity of accounting for cross-border transactions and the tax gap remain urgent problems ^{[3, p. 34]}.

The purpose of this study is to develop theoretical and methodological approaches to the harmonization of VAT as a form of universal excise duty in the EAEU countries, taking into account differences in national economies and tax systems. The article analyzes the role of digital technologies in tax administration, assesses barriers and suggests solutions based on successful international experience. Special attention is paid to the development of recommendations for the creation of a unified digital platform for tax accounting and the unification of VAT administration methods.

The current state of universal excise tax administration in the EAEU countries

The universal excise tax is an important indicator of foreign trade within the EAEU. Thus, the volume of mutual trade between the EAEU countries in 2021 reached a record 73.1 billion US dollars, which is 32.8% higher than in 2020. At the same time, the main contribution to growth was provided by an increase in average prices for goods (by 19.5%) and an increase in the physical volume of mutual supplies (by 11.1%) (statistical portal of the Eurasian Economic Commission). However, the growth of mutual trade is accompanied by challenges related to differences in national approaches to taxation. In particular, the lack of unified VAT administration rules creates barriers to cross-border trade and complicates the integration of the tax systems of the EAEU countries.

Figure 1. Dynamics of mutual trade between the EAEU countries, 2019-2021 (billion US dollars).

Source: compiled and proposed by the author on the basis of the EEC data.

Figure 1 clearly demonstrates the dynamics of mutual trade between the EAEU countries in 2019-2021. The impact of the COVID-19 pandemic led to a significant decrease in trading activity in 2020. However, in 2021, the total volume of trade recovered, reaching 79.5 billion US dollars. Russia retains its dominant position, providing more than 70% of the total trade volume. At the same time, Kazakhstan and Belarus demonstrate stable contributions, while the shares of Armenia and Kyrgyzstan are relatively small. It is worth noting that for the period from 2022 to the present, official statistical information on the volume of foreign and mutual trade by individual member states of the Eurasian Economic Union is classified as information of limited distribution and official statistical information on the volume of foreign and mutual trade in the Eurasian Economic Union is not subject to publication, however, given the introduction of a large number of sanctions in With regard to the Russian Federation, due to its foreign policy on the part of many countries participating in the international market, it can be assumed that the level of mutual trade between the EAEU countries is likely to have increased significantly.

According to the Eurasian Economic Commission, VAT receipts vary significantly in the EAEU countries, due to differences in rates, economic structures, and levels of tax administration automation. For example, in Armenia, the share of VAT in budget revenues reaches 29%, while in Russia it is about 15-17% (statistical portal of the Eurasian Economic Commission). The lack of unified approaches creates obstacles to the harmonization of tax systems, which underscores the need for integrated implementation of digital technologies to optimize VAT management.

At the moment, various initiatives are being implemented in the EAEU countries to digitalize tax administration. An example of successful use of digital technologies is the VAT-2 system implemented in Russia, which allows real-time monitoring of taxpayers' tax obligations, identifying gaps in the supply chain and minimizing the risks of tax evasion. According to the Federal Tax Service of Russia, the introduction of the VAT-2 tax Code has significantly increased the amount of tax revenue. This clearly demonstrates the advantages of digital technologies for increasing the transparency of tax administration ^{[4, p. 196; 5]}. Such solutions are necessary to eliminate tax gaps and form a unified digital ecosystem within the EAEU as a whole.

The Unified Treasury Account has been introduced in Armenia. The unified Treasury account is a centralized system for recording taxpayers' tax obligations, implemented to simplify and transparency tax administration. All amounts paid by taxpayers are credited to this account and are not considered tax income until the relevant tax calculations are provided. Based on these calculations, funds are automatically allocated to subaccounts reflecting obligations for specific types of taxes, including universal excise duty. This approach eliminates excessive overpayments, reduces administrative costs, simplifies the refund of erroneously paid funds, and eliminates the need for offsets between different types of taxes. The introduction of a unified treasury account system has simplified the VAT refund process for exporters, including shortening the processing time for applications and reducing administrative costs. However, its integration with the tax systems of other EAEU countries has not yet been implemented.

A similar mechanism for the payment and distribution of taxes was introduced in Russia in 2023 with the launch of the Unified Tax Account system. However, most of the initiatives related to the digitalization of the administration of individual taxes, including VAT, are local in nature and require integration into the unified digital space of the EAEU ^[6].

In Kyrgyzstan, VAT plays a crucial role in the tax system, providing a significant share of budget revenues. To increase the efficiency of its administration, the republic is actively implementing digital technologies. One of the key steps was the introduction of mandatory use of electronic invoices in 2020 for all VAT payers, including exporters and importers. This initiative has made it possible to improve the accounting of tax liabilities, minimize errors in tax documentation and reduce the share of the shadow economy. It is estimated that the use of ESF at an early stage of implementation contributed to an increase in VAT receipts on imports by 20% in 2018 compared to the previous year ^{[8, p. 45]}.

Electronic invoices in Kyrgyzstan have become the basis of a broader digital strategy for tax administration. Implementation of the portal VAT.salyk.kg Designed for remote registration of taxpayers, including foreign service providers, has become an important step in improving control over cross-border trade. This portal allows you to automate the registration process, which is especially important in the context of the growth of e-commerce. Such measures ensure more accurate accounting of tax revenues and enhance transparency of tax flows.

In addition, Kyrgyzstan is implementing pilot projects in the field of digitalization, such as a product labeling system and the modernization of cash registers with fiscal modules. These initiatives are aimed at strengthening control over the movement of goods on the domestic market and reducing tax evasion. However, their use remains limited, and integration with other digital platforms, including customs systems and national registries, is at an early stage. This complicates the administration of VAT in cross-border trade and reduces the overall effect of the introduction of digital tools ^{[8, p. 195]}.

Despite the positive impact of digitalization on VAT collection, problems remain in Kyrgyzstan related to a lack of investment in technological infrastructure, a lack of qualified specialists and limited opportunities for coordination with the tax systems of other EAEU countries. Nevertheless, the introduction of electronic invoices and other digital solutions demonstrates their importance for improving the efficiency of tax administration and creating a transparent tax system in the republic.

The current state of VAT administration in the EAEU countries reflects significant differences in national approaches, rates, and the level of digitalization. These factors have a significant impact on the efficiency of tax collection and the creation of conditions for the harmonization of tax systems. VAT is a key source of budget revenue in all countries of the Union, but its share and revenue structure vary significantly.

Data from the Eurasian Economic Commission show that VAT provides from 15% to 32% of all tax revenues of the member states. In Armenia, the share of VAT in budget revenues is 29%, which is due to the high share of domestic VAT. In Belarus, this share reaches 30-32%, which is explained by the country's significant dependence on import VAT. In Russia, despite the high tax rate (20%), its share remains at 15-17%, reflecting a greater diversification of the tax base. Kazakhstan, on the contrary, has the lowest VAT rate among the Union countries (12%), which makes its economy attractive to foreign investors, but reduces budget revenues – the share of VAT revenues is 22%. Kyrgyzstan occupies an intermediate position, where VAT accounts for about 27% of all tax revenues (statistical portal of the Eurasian Economic Commission)^{[9, p. 34]}.

Differences in VAT rates and approaches to its administration reflect the specifics of the economic policies of states. In Russia, with an increase in the rate from 18% to 20% in 2019, an increase in budget revenues was achieved, but this decision was criticized by business and society, who feared a negative impact on consumer demand and price levels. In the Republic of Belarus, the VAT rate has been at the level of 20% for a long time, at the same time, tax incentives are actively used to stimulate certain sectors of the economy, such as agriculture. Kazakhstan uses the low rate to create more favorable business conditions, which, however, reduces budget revenues and creates prerequisites for tax competition within the Union. ^{[5, 134]}

The structure of VAT receipts varies depending on the economic model. In Armenia and Kyrgyzstan, the bulk of revenue is accounted for by domestic VAT, which is due to the relatively low share of imports in the structure of the economy. In Russia and Belarus, on the contrary, a significant share of tax revenues is generated by VAT on imports, which reflects their foreign economic orientation. Kazakhstan demonstrates a more balanced revenue structure due to the combination of a low tax rate and simplified accounting for small and medium-sized businesses ^{[4, p. 56]}.

The table based on the ECE data illustrates these differences.:

Table 1. Structure of VAT receipts in the EAEU countries, 2022

Source: compiled by the author on the basis of the EEC data.

One of the key challenges is the administration of VAT in cross-border trade, especially in the field of digital services. With the rapid growth of e-commerce, the lack of a unified approach to determining the tax base and rates creates barriers to effective tax control. Differences in national systems lead either to double taxation or to tax evasion. For example, in Belarus and Russia, digital platforms are required to register with tax authorities and pay VAT, but in other EAEU countries such requirements remain incomplete. This creates the risk of significant amounts falling out of the tax base, especially in the field of cross-border digital services.

The development of the digital economy and the need to improve the efficiency of tax administration in the EAEU countries actualize the implementation of automated VAT control and accounting systems. In this context, digitalization is not only a modernization tool, but also a means of overcoming the main challenges associated with differences in administrative approaches, low transparency of tax processes and significant barriers to mutual trade. Based on the previously reviewed data, it can be argued that the impact of digitalization on VAT collection in the EAEU countries directly depends on the level and scale of its implementation, however, current successes and limitations in this area indicate the need for further coordination and development of integration mechanisms.

In Russia, the digitalization of tax administration, supported by the introduction of automated control systems, has achieved significant success. Data on VAT receipts show that the growth rate of tax revenues has remained consistently high in recent years, as evidenced by a nominal increase in tax revenues of more than 276% over the period from 2015 to 2022. Even taking into account inflation, the growth was 206.8%, which is one of the highest rates among the EAEU countries. These results are attributed to the use of technologies that ensure transparency of supply chains and minimize the possibility of tax evasion. The high degree of digitalization has significantly improved control over the fulfillment of tax obligations, which affects the effectiveness of VAT collection.

VAT receipts in Armenia, despite the introduction of information technologies previously described in this study, lag behind other EAEU countries. Over the same period from 2015 to 2022, nominal growth was 204.5%, while real growth was only 157.3%, which is significantly lower than in Russia or Kazakhstan. This may be due to the limited integration of the treasury accounting system with other elements of tax administration, as well as a smaller tax base, due to the peculiarities of the country's economic structure.

In Kazakhstan, despite the lower level of automation, the increase in VAT receipts remains significant. For the period from 2015 to 2022, nominal growth was 297.2%, and adjusted for inflation — 227.1%. This indicates the positive impact of even partial digitalization measures, such as simplification of tax accounting for small and medium-sized businesses. However, the lack of integrated automated systems and weak integration into cross-border taxation hinder further improvements in tax collection.

Belarus and Kyrgyzstan are also taking steps towards digitalization, but their impact on VAT collection is limited by low coverage and weak integration of implemented solutions. In these countries, automation covers only certain aspects of tax administration, such as electronic invoices, but there are no comprehensive systems that could provide a more significant effect. The growth rates of VAT receipts in these countries are also less pronounced, which underlines the need to expand the scale of digitalization and coordination between the tax authorities of the EAEU (statistical portal of the Eurasian Economic Commission), ^{[9; 10]}.

To illustrate the impact of digitalization on tax collection, we can use a graph reflecting the growth rates of tax revenues in the EAEU countries with different levels of automation.

Figure 2. Dynamics of VAT tax revenues in the EAEU countries (2015-2022), nominal growth

Figure 3. Dynamics of VAT tax revenues in the EAEU countries (2015-2022), real growth

Source: compiled and proposed by the author based on the materials of the EEC.

Thus, the digitalization of VAT administration is a powerful tool for increasing tax collection and removing barriers to trade in the EAEU countries. However, its successful implementation requires not only the introduction of local solutions, but also the development of supranational mechanisms.

Harmonization of universal excise duty in the EAEU

The harmonization of VAT in the EAEU is one of the key tasks for deepening economic integration, increasing transparency of tax transactions and removing barriers to mutual trade. Despite the successes achieved in digitalization and unification of individual administrative elements, differences in tax rates, approaches to their administration and levels of automation continue to be a serious obstacle to effective interaction between Member States.

The main challenge for harmonization is the significant differences in VAT rates, which range from 12% in Kazakhstan to 20% in Russia, Belarus, Kyrgyzstan and Armenia. This difference creates prerequisites for tax competition, which undermines the level playing field and increases the risks of tax evasion in cross-border trade. An example of successful removal of such barriers is the European Union, where the harmonization of rates has reduced the VAT Gap and strengthened economic ties between the member countries ^{[11, p. 78]}.

A promising direction for the EAEU countries is the further digitalization of tax administration. The analysis shows that states with a high level of automation demonstrate a more steady increase in tax revenues. The above statistics on the real growth of VAT revenues reflect the superiority of tax systems that use a greater number of digital solutions over systems with limited digitalization. This highlights the need to create a single digital platform for accounting for tax transactions in the EAEU, which would allow coordinating the efforts of tax authorities, reducing administrative costs and minimizing the tax gap.

An important aspect of harmonization is the taxation of cross-border transactions, especially in the field of electronic commerce. In the absence of unified rules for VAT accounting for digital services, the EAEU countries face losses in tax revenues and a distorted competitive environment. To solve these problems, the European Union uses the OSS (One Stop Shop) system, which automates the registration of foreign suppliers and simplifies the payment of VAT in the destination country. Introduced in July 2021, OSS is an extension of the previously operating Mini One Stop Shop (MOSS) and covers three key schemes: Union OSS, Non-Union OSS and Import OSS. It allows registered companies to file declarations and pay VAT for all operations in EU countries through a single point, avoiding the need to register in each country where they operate.

Basic OSS Schemes:

· Union Scheme: for companies registered in the EU that sell goods or services to consumers in other EU countries.

· Non-Union Scheme: for companies not registered in the EU that provide services to consumers located in EU countries.

· Import Scheme: for companies importing goods from non-EU countries worth up to 150 euros.

OSS operation mechanism

1. Companies register in one of the EU countries, which becomes a "Member State of Identification" (MSID).

2. VAT for transactions with consumers from other EU countries is transferred through the country of identification, which then transfers the funds to the corresponding "Member States of Consumption" (MSCON).

OSS covers operations such as intra-Community distance sales, the import of low-value goods from countries outside the EU, and the provision of services such as electronic services, telecommunications, and broadcasting.

The system simplifies the payment of VAT for remote sales and cross-border trade, allowing companies to register and file tax returns through a single point in their country, which significantly reduces the administrative burden ^{[12; 13]}.

OSS has proven its effectiveness in the EU. For example, using the system has reduced business administrative costs by 95%, and in 2018, tax revenues through MOSS exceeded 4.5 billion euros. These indicators confirm the feasibility of implementing similar solutions in other economic unions, such as the EAEU, to improve tax administration and harmonization.

However, the EU experience has also revealed the limitations of OSS. The system does not cover all types of transactions, and technical implementation requires significant costs for the unification of IT systems between countries. It is important for the EAEU to use OSS as a model that could become the basis for creating a single digital window in the tax sphere. Such an approach would solve the problems associated with cross-border trade and ensure equal conditions for market participants.

The introduction of a similar system in the EAEU could increase tax collection by 20-25% already in the first years of its operation ^{[14, p. 67; 15, p. 112]}.

The VAT Gap There remains one more indicator that is not yet evaluated in the EAEU countries, but is widely used in the EU. It allows you to analyze the effectiveness of VAT administration and identify the main problems in tax collection. In the EU, the VAT Gap ranges from 5% in countries with a high level of digitalization to 30% in countries with a less developed tax system. An assessment of similar indicators in the EAEU could become the basis for improving the efficiency of tax administration and reducing budget losses ^{[16, p. 112]}.

The introduction of a single digital platform for VAT administration in the EAEU could be an effective solution for the harmonization of tax systems. Such a platform would make it possible to coordinate the efforts of tax authorities, minimize losses from evasion and eliminate barriers to trade. An example is the use of automatic exchange of taxpayer data between EU countries, which has led to a reduction in the VAT Gap by 15% in five years. For the EAEU, the creation of such a mechanism would be an important step in the unification of tax administration.

Conclusions

As a result of the research:

1. It has been established that VAT as a form of universal excise duty is one of the key sources of budget revenues in the EAEU countries. However, the share of VAT in total tax revenues varies significantly between countries, due to the peculiarities of national economies, the structure of the tax base and the level of digitalization of tax administration.

2. Significant differences in VAT rates have been established between the EAEU countries. For example, Kazakhstan, which offers a low VAT rate (12%) to support small and medium-sized businesses, faces the risk of reducing tax revenues, especially in the context of cross-border trade. Armenia, using the unified treasury account system, demonstrates the positive results of digitalization, but its potential is limited by the lack of integration with the tax systems of other countries of the Union.

3. Significant differences in the level of digitalization of tax administration among the EAEU countries have been identified. Russia is characterized by a high degree of automation of tax processes, including the use of systems similar to the VAT-2 ASK. At the same time, other countries of the Union, such as Kyrgyzstan and Armenia, have a medium or low level of digitalization, which limits the effectiveness of tax administration.

4. It is revealed that the lack of harmonization of tax policy within the EAEU remains one of the key obstacles to the further development of integration processes. These include differences in VAT rates, the lack of a single digital platform for data exchange, and the use of foreign software products instead of the Union's joint developments.

5. Three strategic directions have been developed for the development of the universal excise tax system aimed at achieving harmonization and improving the efficiency of tax administration: the unification of VAT rates, the creation and implementation of integrated digital platforms for tax accounting, as well as strengthening the coordination of tax policy in the field of cross-border trade.

In this regard, the following measures are proposed to develop the digitalization of the administration of universal excise duty (VAT).

1. Harmonization of tax rates and administrative rules: The harmonization process should take into account not only the economic characteristics of the EAEU countries, but also their long-term development strategies. For example, for Kazakhstan, it is important to support small and medium-sized businesses by maintaining preferential tax conditions, while for Russia, the focus may be on increasing tax collection through highly automated systems. The development of a unified approach to VAT administration should combine these priorities while maintaining a balance between fiscal efficiency and economic competitiveness of countries.

2. Creation of a single digital platform for the exchange of tax data: The introduction of an integrated platform that will ensure the automatic exchange of information between the tax authorities of the EAEU countries, will unify the processes of taxation of cross-border transactions. This will not only eliminate barriers caused by differences in national systems, but also create conditions for transparency, prevention of tax evasion and reduction of administrative costs.

3. Unification of tax policy in the field of cross-border trade: Expansion of mechanisms for automatic exchange of data on taxpayers and transactions, support for electronic documentation, as well as simplification of VAT payment procedures for cross-border transactions. This approach will reduce the risk of a tax gap and ensure a level playing field for businesses, stimulating the growth of mutual trade. International experience, for example, the introduction of the OSS system in the EU, confirms that a coordinated policy helps to reduce tax losses and increase budget revenues.

4. Development of a unified supranational tax strategy: The EAEU should focus on developing a comprehensive strategy aimed at integrating tax systems. This strategy should be based on the principles of transparency, efficient administration and digitalization. Taking into account international experience will allow the EAEU to create a modern and competitive taxation system that will take into account the unique needs of each member state, while maintaining common standards.

I would like to express my special gratitude to my supervisor Mikhail Miyassyarovich Yumaev, Doctor of Economics, Associate Professor of the Department of Taxes and Tax Administration at the Financial University under the Government of the Russian Federation for his significant comments and important advice during the research and design of this article.