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Taxes and Taxation
Reference:

Development of the concept of permanent representation as a tool to increase the "tax" attractiveness of the Russian economy

Makhneva Evgeniya Dmitrievna

Bachelor's degree, Department of Taxes, Audit and Business Analysis, Financial University under the Government of the Russian Federation

127083, Russia, gorod federal'nogo znacheniya, g. Moscow, ul. Verkhnyaya Maslovka, 15

zhenja-makhnyova12@yandex.ru

DOI:

10.7256/2454-065X.2022.2.37304

Received:

13-01-2022


Published:

24-05-2022


Abstract: The object of this study is the taxation of profits and incomes of foreign companies in the context of the institute of "permanent representation", the subject is the problems of collecting mandatory payments and the transformation of the institute in the conditions of digitalization of the economy. Within the framework of the article, the authors analyze the nature of a permanent establishment as a certain characteristic of a subject of tax law based on foreign experience. When revealing the objective reasons and prerequisites for the need to transform this institution, an analysis is also carried out based on the subjects of world economy and the theoretical approach of domestic researchers of such a transformation option as the introduction of the definition of "digital permanent representation". As a result of the study, the authors come to the conclusion about the need for qualitative changes in Russian tax law in terms of the regulation of permanent representation: its definitions, definitions of a single approach to a single technological process and the need to introduce the institute of digital permanent representation. When studying this problem, qualitative theoretical and practical analyses were carried out. The scientific novelty of the study consists in substantiating the existence of significant problems in the regulation of taxation of profits and income of foreign companies operating in Russia, in particular, through permanent representative offices, and proposals for their elimination.


Keywords:

taxation, permanent representation, income tax, digital permanent representation, OECD, international taxation, foreign organizations, profit, tax residency, multilateral convention

This article is automatically translated.

The state, in its essence, is a sovereign participant in the world economy. Along with territorial and political sovereignty, it also has tax sovereignty. The definition of the applicable concept of taxation, in particular when establishing corporate income tax (corporate tax), is one of the fundamental in the tax system of each state. The importance of this circumstance is determined by the share of tax revenues in the GDP of all countries of the world (Figure 1).

Source: Revenue Statistics 2020. Tax revenue trends in the OECD [Electronic resource]. URL: https://www.oecd-ilibrary.org/taxation/revenue-statistics-2020_8625f8e5-en (accessed: 24.01.2022); Report on the accrual and receipt of taxes, fees and other mandatory payments to the budget system of the Russian Federation for 2019 [Electronic resource]. URL: https://rosstat.gov.ru/accounts (date of application: 24.01.2022);

Figure 1. The share of tax revenues in the GDP of states in 2019, %

 In addition, due to rapid globalization, it is impossible not to note the increasing role of cross-border trade, which is only increasing against the background of the COVID-19 pandemic. This trend is also noted in the annual report of the World Trade Organization (hereinafter – WTO) for 2021, as shown in Figure 2. It is important to note that the presented data did not take into account the costs of purchasing tickets for events and for trips ordered via the Internet (hereinafter referred to as the Internet), regardless of the device, payment method or order fulfillment.

Source: World Trade Report 2021. Economic resilience and trade [Electronic resource]. URL: https://www.wto.org/english/res_e/booksp_e/wtr21_e/00_wtr21_e.pdf (accessed: 05.02.2022)

Figure 2. Global e-commerce volume for 2014-2020, USD billion

The Russian Federation, being part of the world economy, is also in this trend. Thus, Figure 3 shows the dynamics of the annual market value of domestic and cross-border e-commerce in Russia from 2010 to 2020, the analysis of which allows us to note an unstable growth rate, both in cross-border and domestic e-commerce. In particular, a sharp jump in the growth of domestic trade in 2020 is associated with the COVID-19 pandemic. However, in addition to the spread of this infection, the internal electronic commerce was also affected by the devaluation of the ruble and the deterioration of customs conditions [13].

 
   

Source: Annual market value of domestic and cross-border e-commerce in Russia from 2010 to 2021 [Electronic resource]. URL: https://www.statista.com/statistics/1073682/russian-e-commerce-market-value-by-segment / (accessed: 05.02.2022)

Figure 3. Dynamics of the annual market value of domestic and cross-border electronic commerce in Russia from 2010 to 2021, billion rubles.

 A similar situation is observed in the Russian IT market (Figure 4): a decline was observed in 2015, which was caused by the devaluation of the ruble. It is important to note that the data for 2018 is a forecast for the spring of 2018; the data for 2020 is a preliminary estimate. However, in the following years there has been a steady growth of the IT industry. It should be noted that the researchers noted that 2020 was "the year of growth of the IT market" [11]

Source: IT market of Russia [Electronic resource]. URL: https://www.tadviser.ru/index.php/Ñòàòüÿ:IT market_Russia (accessed: 05.02.2021)

Figure 4. The volume of the Russian IT market, billion US dollars

 The tax potential of e-commerce for the Russian budget is also evidenced by the calculations of domestic researchers. So, Milogolov N.S., and Mitin D.A. in 2018 estimated the potential tax base for the import of digital services for VAT at 614,660.27 million rubles. [5][1] From which we can make an approximate estimate that the tax base for corporate income tax was similar, and the tax amount was 122,932 million rubles.rub .

It is important to clarify that, as noted by the UN Deputy Secretary-General and Executive Secretary of the UNECE Olga Algaerova, simplification of digital trade is necessary "to ensure the smooth operation of supply chains and accelerate sustainable development" [14]. The growth of the domestic e-commerce market is also reported by the Association of Internet Companies. Thus, according to this organization, for the period from January to February 2021, the growth in the volume of online commerce amounted to 44% - up to 431.3 billion rubles. One of the reasons for the growth, according to the Association, is the willingness of foreign companies to invest "in the creation of full-fledged online stores, invest in infrastructure development, create jobs", as well as improving the competitiveness and quality of domestic goods [16]. On the other hand, such digital giants as Apple, Meta, TikTok, Twitter, Google and others, without having their representative offices in Russia, are not required to pay taxes on the income they receive from the sale of their goods and services to users on its territory. Consequently, one of the fundamental principles in taxation formulated by Adam Smith is violated – the principle of fairness.  The latter circumstance may in the future significantly reduce the tax incentives of Russian taxpayers and, as a result, negatively affect revenues to budgets of all levels. The above circumstances determine the relevance of the topic of this study.

 Tax concepts

One of the most important and significant issues in the framework of international taxation is the distribution of profits and income between jurisdictions for tax purposes [7]. In this regard, we have paid special attention to the existing concepts of taxation:

1) worldwide taxation, implying taxation of a resident regardless of the source of income. Despite the fact that most countries of the Organization for Economic Cooperation and Development (hereinafter – the OECD) have moved away from this concept in order to reduce barriers to international capital movement, there are still states in which this concept is reflected in national tax systems [6]. Currently, there are three such participants in international relations from among the OECD participants: Chile, South Korea and Mexico [20];

2) taxation at source, expressed in the fact that the subjects of taxation are both residents and non–residents, and the objects are their income received on the territory of this state.

Russian tax law combines both approaches [3]. On the one hand, in accordance with paragraph 1 of Article 246 of the Tax Code of the Russian Federation (hereinafter referred to as the "Tax Code, Tax Code of the Russian Federation"), all Russian organizations are recognized as taxpayers, and the object of taxation is defined as income received from sources in Russia and abroad. On the other hand, in 2015, Article 246.2 was introduced into the Tax Code, which supplemented the tax legislation with the institution of tax residency when calculating corporate income tax. In accordance with this article, foreign organizations that were recognized as tax residents of the Russian Federation, unless otherwise provided by an international treaty of the Russian Federation on taxation, were equated to domestic legal entities, therefore, their profits, regardless of the place of receipt, are taxed.

The concept of withholding tax is expressed in the case when income received by foreign organizations that are not tax residents of Russia from sources in the Russian Federation is subject to taxation.

Institute of Permanent Representation

It is important to note that the Tax Code of the Russian Federation also defines the third basis for the right of the state to tax the income of foreign non-resident companies. In this case, we are talking about doing business through a permanent representative office (hereinafter – PP). Some researchers single out this institution as a separate concept, because it does not fit into any of the previously mentioned taxation models [9]. The interest in the concept of permanent representation also lies in the fact that this approach has similarities with the concept of taxation at source. According to paragraph 1 of Article 307 of the Tax Code of the Russian Federation, income related directly to this permanent establishment is recognized as an object of taxation for foreign organizations operating in the Russian Federation through a permanent establishment. This approach of the legislator is quite reasonable and in the context of this article, a proposal for the development and justification of permanent representation as an independent concept of taxation will also be presented.

The current concept of the institution of permanent representation currently requires the elimination of existing contradictions, primarily related to its definition. The definition of a permanent representative office is given in paragraph 2 of Article 306 of the Tax Code of the Russian Federation, according to which it is any separate subdivision or other place of activity of an organization through which it regularly carries out business activities on the territory of the Russian Federation. It should be noted that not every business activity implies the creation of a permanent representative office, but only:

1) use of natural resources (subsoil);

2) implementation of works stipulated by the contract related to equipment, including slot machines;

3) sale of goods from located on the territory of the Russian Federation and owned by this organization or leased by it;

4) carrying out other works, rendering services, conducting other activities, with the exception of others provided for in paragraph 4 of Article 306 of the Tax Code of the Russian Federation.

The list is, on the one hand, open, but on the other hand, the article also provides for facts of economic activity that do not lead to the formation of a permanent representative office (Table 1).

Table 1 – Facts of the economic life of a foreign organization, which, in the absence of other signs of permanent representation listed in paragraph 2 of Article 306 of the Tax Code of the Russian Federation, are not related to the formation of a permanent representation

The fact of the economic life of a foreign organization, which, in the absence of other signs of permanent representation listed in paragraph 2 of Article 306 of the Tax Code of the Russian Federation, is not associated with the formation of a permanent representation

Reference to the provision of the Tax Code of the Russian Federation

Implementation of preparatory or auxiliary works, the essence of which is disclosed in the relevant sub-paragraphs

paragraph 4 of article 306

Ownership of securities, shares in the capital of domestic organizations and other property on the territory of the Russian Federation

paragraph 5 of article 306

Conclusion of a simple partnership agreement and other agreement on joint activities in whole or in part on the territory of the Russian Federation

paragraph 6 of article 306

Referral of employees under the contract on the provision of labor of employees

paragraph 7 of article 306

Import and export of goods

paragraph 8 of article 306

Provision of services according to the list given in paragraph 1 of Article 174.2 of the Tax Code of the Russian Federation, if the Russian Federation is recognized as the place of sale

paragraph 14 of article 306

     Thus, it is possible to distinguish the main features of a permanent establishment defined by Russian tax law:

1) the presence of a place of activity (a separate subdivision);

2) carrying out regular business activities (with the exception of the above facts).

According to the results of the study, the following number of problems were identified related to the institution of permanent representation within the framework of Russian tax law.

Uncertainty in the interpretation of the definition of permanent establishment

However, the current version of the Tax Code does not provide an unambiguously interpreted definition of a permanent establishment.

It is important to note the fact that the definition does not reveal the essence of a permanent establishment, but only gives its signs. In general, Russian tax law complies with the OECD Model Convention on Taxes on Income and Capital (hereinafter referred to as the Convention). In article 5 of the specified international source of law, a permanent establishment is defined as a permanent place of activity through which entrepreneurial activity is carried out in whole or in part. In particular, paragraph 2 of this article of the international regulatory legal act provides examples of a permanent establishment, which include a place of management, a branch, an office, a factory, a workshop, a place of extraction of natural resources [23]

Some uncertainty in the interpretation of the permanent mission is due to the absence of an appropriate definition in Article 9 of the Tax Code of the Russian Federation "Participants in relations regulated by the legislation on taxes and fees" and Article 11 of the Tax Code of the Russian Federation "Institutions, concepts and terms used in this Code". Thus, a permanent representative office is not a separate participant in economic relations and not a separate taxpayer of income tax, but the embodiment of a special characteristic of a subject of tax law that allows the state to tax the activities of this subject [9]

To solve this problem, we propose to introduce into Russian legislation the definition of "permanent establishment" from a Multilateral convention or from the tax law of the Czech Republic, which was considered in the study in connection with the geopolitical proximity of Russia and the Czech Republic. According to Czech law, the establishment of a permanent representative office is associated with the presence of a fixed place of business, long-term (more than 6 months during any 12 consecutive months) provision of services or the presence of a dependent agent, unless otherwise provided by the agreement on avoidance of double taxation [18]. As a result of the proposed changes, the legislative framework will be simplified, the risks of abuse by various departments will be minimized, which, in turn, will become a factor in increasing the level of investment attractiveness of Russia. Thus, the proposed addition to the Russian legislation will contribute to the motivation of doing business by foreign organizations on the territory of the Russian Federation, and, as a result, will lead to an increase in tax revenues to the Russian budget. This naturally implies the "tax" attractiveness of the national economy, which, according to the author, is expressed in the construction of a tax system that will be understandable, i.e. without ambiguous interpretation of norms; with tax rates set according to the Laffer curve, and a wide range of benefits.

Lack of an exhaustive definition of a single technological process

In the tax legislation of Russia, there are problems in the taxation of permanent missions related to the peculiarities of determining the tax obligations of representative offices of foreign organizations. In accordance with clause 4 of Article 307 of the Tax Code of the Russian Federation, if there are several permanent representative offices, the tax base and the amount of tax are calculated separately for each representative office. An exception is made for activities within the framework of a single technological process or other similar cases in coordination with the federal executive authority for control and supervision in the field of taxes and fees.  However, this right cannot be fully implemented due to the lack of an exhaustive definition. Thus, in the Letter of the Federal Tax Service dated March 25, 2015 No. GD-4-3/4811@ "On the application of the provisions of paragraph 4 of Article 307 of the Tax Code of the Russian Federation" it is noted that the technological process means "the process of industrial production, construction". The Federal Tax Service draws attention to the fact that the presence of a general management of logistics, the use of the same equipment by departments at different times, the management of other departments by one department do not create a single technological process by themselves. However, this is where the interpretation of the definition ends. Further, the tax service points out that, in accordance with the Tax Code of the Russian Federation, it has the right to consider the calculation of taxable profit as a whole for a group of branches of a foreign company operating in Russia, if a written request is provided and documents confirming the unified technological process, as well as explanations to them. It follows from this that each individual situation is considered on an individual basis, which, in our opinion, is a factor constraining the influx of foreign companies into the Russian market, as well as potentially contributing to the appearance of a corruption component in the decision being made.

To solve this problem, we propose to introduce a unified concept of a single technological process, which, in our opinion, should be understood as such a system of interrelated actions between several permanent missions, within which the production chain cannot be fully implemented if any representation is excluded from it.

Digital Permanent Representation

Finally, the main direction of the development of the PP concept is the introduction of the institute of digital permanent representation [8,22]. In the context of digitalization of all aspects of society, including the economy, the financial institutions of the state, first of all the tax authorities, are increasingly facing the problem of uncertainty in the taxation of companies operating on the Internet. Modern definitions of "permanent representation" ignore such representatives of online business as "Amazon", "Alibaba", "Shein", as well as countless other small and medium-sized online stores, market places, search engines related to advertising that are not physically present on the territory of a particular country, but receive income from the sale of goods or services to consumers located on its territory [4].

Also, the relevance of this problem is demonstrated by the dynamics of the number of orders in Russia (Figure 5) and the growth rates of Internet sales markets in individual countries (Figure 6):

Source: E-commerce in Russia 2020. [electronic resource]. URL: ttps://datainsight.ru/DI_eCommerce2020 (accessed: 12.01.2022)

Figure 5. Dynamics of the number and growth of online orders in Russia

 
 

Source: E-commerce in Russia 2020. [electronic resource]. URL: https://datainsight.ru/DI_eCommerce2020 (accessed: 12.01.2021)

Figure 6. Average annual growth rate of digital markets in 2020 – 2024

 

In this case, the question of introducing the concept of "digital (permanent) representation" is increasingly being raised. So, in India, if there is no physical presence in the country, the company makes transactions in the amount of 2 or more crore rupees (20 million rupees), as well as the number of users of this organization exceeding 3 million, then, according to Indian law, the company creates a digital permanent establishment, and its activities are subject to a transnational tax [24]. Andreev N.Yu. offers the following definition of a permanent establishment – "the place of activity through which an enterprise fully or partially conducts its activities, including the state or territory of its digital presence, in which it has the main source of users, the place of receipt of the main income" [2]. On the other hand, in 2018, the directive of the European Commission on the development of legislation in the field of e-commerce indicated the need. additions to the definition of a permanent establishment as a "digital permanent establishment", which occurs when one of the conditions is met: either the annual turnover of the digital platform exceeds 7 million euros, or among the registered users there are 100 thousand citizens of the member states of the European Union. The third potential condition for the formation of a digital permanent representation is the conclusion of more than 3 thousand contracts for the provision of electronic services in the reporting period to EU residents. [20]   However, this definition is aimed at the formation of digital representation only in countries that are the main source of income for digital giants, which does not completely solve the problem of fairness.  As previously mentioned, in the OECD Model Concept for taxes on income and capital, the definition of a "permanent establishment" is based on a fixed place of business, which means a place of management, branch, office, factory, etc. However, as is known, e–commerce can be carried out on the territory of a state remotely from another. It is also becoming quite important that digital trade requires a special approach due to the complexity of regulation. It follows from this that the term "digital permanent establishment" can be proposed to mean not just a place of activity, but a specific state, territory, including a digital presence that provides income at the expense of users located there. Also in the OECD interim report for 2018. three factors have been formulated that need to be taken into account when determining digital representation: revenue generation, digital presence, and the number of users [2].

On February 1, 2021, the President of the Russian Federation, Vladimir Putin, instructed to develop additional requirements for foreign IT companies, which should encourage companies, among other things, to open permanent representative offices in Russia. According to A.Zhuravlev, chairman of the commission on legal support of the digital economy of the Moscow branch of the Russian Bar Association, in the absence of such incentives, unfair competition is created, because some companies, receiving income from sources in the territory of the Russian Federation, do not incur any expenses, including not paying mandatory payments [12].

However, when implementing the "digital (permanent) representation" project, the following risks must be taken into account:

1. The use by users of secure encrypted connection systems (Virtual Private Network, hereinafter referred to as VPN), which will bypass local restrictions and preserve confidentiality.

2. Migration of companies from the state with the imposed restrictions to "digital offshore", i.e. countries where there is no such type of representation. Therefore, the implementation should not come from only one State – it should be at the global level.

3.                  Lack of necessary technical capabilities for blocking and control. The State, represented by the authorized executive authorities, must be provided with the necessary hardware resources. So, Russia has a negative experience of blocking the Telegram messenger (launched by Roskomnadzor in the spring of 2018). However, due to insufficient resources, the application continued to work, and in the summer of 2020 the restrictions were lifted.

Conclusions

            The conducted research has shown that at present, qualitative changes are needed in the content and practice of applying the concept of permanent representation not only at the national level, but also at the international level. Indicated by the author of this study are aimed at solving emerging problems. They include:

- introduction of a new definition of "permanent establishment" in the Tax Code of the Russian Federation, developed on the basis of the OECD Model Concept and Czech tax Law;

- inclusion in the system of relations between taxpayers and tax authorities of an exhaustive definition of the "unified technological process" proposed by the authors;

- introduction of the definition of "digital permanent establishment".

Taken together, these proposals will improve the investment attractiveness of the Russian market not only for foreign, but also for domestic companies for the following reasons:

Firstly, the level of uncertainty will decrease when foreign companies enter the Russian market;

secondly, the level of taxation uncertainty will decrease in view of the individual approach of tax authorities to several permanent missions applying for the calculation of the tax base within a single technological process;

Thirdly, the principle of equality will be implemented as a result of taxation of income received by foreign companies in the locations of the source of such income.

References
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The development of the concept of permanent representation as a tool to increase the "tax" attractiveness of the Russian economy, international trade has reached a new level with the development of remote sales channels. Its development determines the need for appropriate improvement of its state regulation in general and taxation in particular. Most developed countries today deal with the taxation of e-commerce, cross-border trade and IT business. For several years now, the leading G20 and OECD countries have been unable to resolve the issue of introducing a single tax. And so far, a compromise has obviously not been reached, despite the availability of a wide range of proposals and a choice between several most suitable alternatives. The article is devoted to the study of the problems of functioning and development opportunities of the institution of permanent representation in the framework of improving international taxation in Russia. The article is divided into 7 sections: "Introduction", "Concepts of taxation", "Institute of permanent representation", "Uncertainty in the interpretation of the definition of permanent representation", "Lack of an exhaustive definition of a single technological process", "Digital permanent representation", "Conclusions", which meets the requirements of the journal. The introduction describes the relevance and significance of the study of approaches to taxation of value chains in a transforming global economy, with an increased share of cross-border transactions and e-commerce via remote channels. However, the question arises as to how significant this is for Russia? How much tax revenue is at risk to the budget system? In comparison with other countries, how big is the budget dependence on the revenues of foreign companies implementing projects in the field of e-commerce and IT? We suggest that the author take a slightly broader look at the problem under study. In the following thematic sections, the author gradually examines the characteristics of the institution of permanent representation as one of the concepts of taxation, identifies shortcomings in approaches to the functioning of this institution that lie in the regulatory plane. This, according to the author, is primarily the ambiguity of the interpretation of the permanent mission and the unified technological process in the tax legislation of the Russian Federation. Separately, the author dwells on the experience of the development of the institute of digital permanent representation. In the "Conclusions" section, the author summarizes the results of the study, as well as describes possible directions for its continuation. The title of the article in its second part does not fully correspond to its content. The author has not disclosed the category of the tax attractiveness of the economy in the text of the article. It is necessary either to add an appropriate section on the text of the article, or to adjust the title. In this regard, we also consider it necessary to draw the author's attention to a somewhat one-sided study of such a complex problem. Is it only the regulatory imperfection of the institution of permanent representation that limits the influx of foreign investors into the Russian economy? And among the totality of factors, how significant is it? And what is the place and relationship with Russia's economic problems and modern risks of geo-economic turbulence? The methodological basis of the research is analysis, synthesis, ascent from the abstract to the concrete, logical and historical method, as well as other general scientific methods. Among the specific economic methods, the author uses economic analysis. The relevance of the article is beyond doubt. The modern economy, its development and dynamics today are largely based on IT business and e-commerce. The pandemic and lockdown have had a significant impact on their development and the enhancement of their role in shaping global value chains, which has yet to be evaluated by modern researchers. state and tax regulation of these sectors of the economy is still imperfect, international approaches are just beginning to be developed. The article has practical significance, since the results obtained by the author can be used in the framework of improving the tax legislation of the Russian Federation in terms of interpreting the institution of permanent representation and the unified technological process. The research has elements of scientific novelty. It seems that they consist in the formation of the author's approach and justification for clarifying the definitions of permanent representation, a single technological process and the need to introduce the institute of digital permanent representation in Russian practice. Perhaps the author should pay more attention to the differences between the existing proposals of scientists in substantiating his own position. The presentation style is scientific and meets the requirements of the journal. At the same time, there are grammatical and punctuation errors in the article, as well as stylistic repetitions that need to be eliminated. For example, "uncertainty... in the definition of ", "this country", "according to Czech law, ...". The bibliography is presented by 19 sources: research by domestic and foreign scientists, as well as international analytical databases. The advantages of the article include, firstly, the relevance and significance of the chosen research area. Secondly, the presence of elements of scientific novelty and the practical significance of the conducted research. Thirdly, the use of illustrative material. The disadvantages include the following. First, there is the need to specify and justify the category of "tax attractiveness of the economy". Secondly, there is a lack of analysis of the role of tax payments from cross-border e-commerce and IT businesses in the Russian budget system. Thirdly, there is a lack of identification of the factors preventing investment in the Russian economy and the place of problems in international taxation among them. Fourth, the lack of a full-fledged scientific discussion regarding the analysis of the points of view of scientists conducting alternative research in the chosen direction. Conclusion. The article is devoted to the study of the problems of functioning and development opportunities of the institution of permanent representation in the framework of improving international taxation in Russia. The article is able to arouse the interest of a wide readership of the magazine. It is recommended to accept for publication in the journal "Taxes and Taxation", provided that the comments indicated in the text of this review are eliminated.

Second Peer Review

Peer reviewers' evaluations remain confidential and are not disclosed to the public. Only external reviews, authorized for publication by the article's author(s), are made public. Typically, these final reviews are conducted after the manuscript's revision. Adhering to our double-blind review policy, the reviewer's identity is kept confidential.
The list of publisher reviewers can be found here.

The subject of the study. Based on the title, the article is devoted to the development of the concept of permanent representation in the Russian Federation as a "tool to increase the tax attractiveness of the Russian economy." At the same time, familiarization with the content of the scientific work allows us to conclude that the content of the article does not correspond to the stated topic, since a direct relationship between the development of permanent missions and the growth of the tax attractiveness of the state is not shown. It is recommended to eliminate this contradiction. The research methodology is based on the use of statistical methods for constructing dynamic series. The author presents the obtained results graphically, which positively characterizes the reviewed scientific article, since it allows you to visually familiarize yourself with the factual material that forms the basis for the formation of conclusions and recommendations on the issues under consideration. The relevance of the chosen research topic is beyond doubt, since the problems of the development of permanent missions require solutions in the context of ensuring the growth of the attractiveness of the Russian economy for foreign investors and increasing the mobilization of revenues to the budgets of the budgetary system of the Russian Federation, which are necessary to solve a wide range of tasks. A qualitative solution to these issues will make it possible both directly to achieve the national development goals of the Russian Federation, defined by the President of Russia (in terms of the growth of entrepreneurial activity), and indirectly (due to the growth of tax revenues of the budgets of the budgetary system of the Russian Federation, which will allow financial support for the achievement of other national development goals of our state). Scientific novelty. In the presented scientific article, it was possible to find the beginnings of certain elements of scientific novelty (in terms of specifying proposals for the formation of definitions for their inclusion in the Tax Code of the Russian Federation, but no specific justification for these recommendations is provided), however, increased work in this direction is required. Style, structure, content. The style of presentation is generally scientific. However, according to the text of the article, the author uses the phrase "it can be noted", but its use is not accepted in scientific works. Unfortunately, the article contains a number of spelling errors and typos (for example, in the final line of the first paragraph, instead of the word "all" there should be the word "all", based on the format of the construction of this phrase). The content of the article is divided into blocks, but the text is presented inconsistently, but in separate fragments ("chunks"). Also, familiarization with the article revealed a number of internal contradictions. So, the name of Figure 3 indicates the period of the analyzed data with the time interval "2010-2021", however, the figure shows data for 2010-2020. Moreover, the author states in the text that there is stable growth, however, based on the figure, we see that in 2019 the growth was 112%, and in 2020 – 128%, which indicates a lack of stability in growth. In addition, the author is recommended to indicate the reasons for these changes: how much will they have a subsequent impact on maintaining the 2020 trend? How likely is it that the opportunities for further growth have been exhausted? The presentation of data on the volume of the IT market in Russia in US dollars also raises questions due to the fact that internal calculations are made in rubles and it would be more correct to provide data in the official currency enshrined in the Constitution of the Russian Federation. The final part of the article is poorly developed, related to the clear formulation of problems based on the analysis of disparate data and the development (with justification) of recommendations for their solution. Bibliography. The author has studied both publications of domestic and foreign authors in periodicals (most of which have been published in recent years, which allows us to conclude that modern trends in the scientific community on the development of permanent missions are taken into account). The study also relies on electronic resources and regulatory legal acts, the use of which is justified and creates prerequisites for the highest quality disclosure of the chosen research topic. However, it should be noted that there is no unified approach to the design of the same type of sources, most of which are not formed according to the requirements of GOST. Appeal to opponents. Despite the fact that the author has studied a wide range of scientific publications on the research topic, however, references to the literature in the text are exclusively on secondary issues, no scientific discussions regarding conclusions and recommendations are presented. The elimination of this remark will also allow the author to provide solutions to other problems – for example, to enhance the scientific novelty of this study. Conclusions, the interest of the readership, taking into account the above and based on the fact that, due to the relevance of the chosen research topic, the article has a potential interest of the readership (primarily for the scientific community and employees of the Federal Tax Service), it can be recommended for publication after making adjustments to the comments indicated in the review (especially in terms of strengthening scientific novelty by substantiating the existence of problems and a set of recommendations for their solution).

Third Peer Review

Peer reviewers' evaluations remain confidential and are not disclosed to the public. Only external reviews, authorized for publication by the article's author(s), are made public. Typically, these final reviews are conducted after the manuscript's revision. Adhering to our double-blind review policy, the reviewer's identity is kept confidential.
The list of publisher reviewers can be found here.

In the material submitted for review, the development of the concept of permanent representation as a tool to increase the "tax" attractiveness of the Russian economy. The scientific novelty of the conducted research, according to the reviewer, lies in the conclusions that qualitative changes are needed in the content and practice of applying the concept of permanent representation not only at the national level, but also at the international level. The following structural elements are highlighted in the reviewed material: Taxation concepts, the Institution of permanent representation, Uncertainty in the interpretation of the definition of permanent representation, the lack of an exhaustive definition of a single technological process, Digital permanent representation, Conclusions, Bibliography. The authors attribute the relevance of the study to the fact that foreign digital companies, without having their representative offices in Russia, are not obliged to pay taxes on the income they receive from the sale of their goods and services to users on its territory, in connection with which one of the fundamental principles in taxation is violated – the principle of fairness. The authors of the article talk about the increasing role of cross-border trade against the background of the COVID-19 pandemic and note that the Russian Federation is also in this trend, while paying attention to the unstable growth rate of both cross-border and domestic e-commerce. When considering the concepts of taxation, the article highlights the concept of worldwide taxation, which implies taxation of a resident regardless of the source of income, as well as the concept of taxation at source; it is noted that Russian tax law combines both approaches. In the form of a separate table, the facts of the economic life of a foreign organization that are not related to the formation of a permanent representative office are highlighted; it is noted that the current version of the Tax Code does not provide an unambiguously interpreted definition of a permanent representative office, it also says that there is no exhaustive definition of a single technological process. Special attention is paid in the article to the introduction of the institute of digital permanent representation; foreign experience in this field is considered. The conclusions of the article show why the author's proposals will improve the investment attractiveness of the Russian market not only for foreign but also domestic companies. The bibliography of the article includes a list of 26 items, among which there are publications by domestic and foreign authors on the research topic in recent years, online sources in the form of analytical reviews, as well as Russian tax legislation. There are address references to the sources listed in the list of references in the text, indicating the presence of an appeal to opponents in the article. However, the reviewed article is not without flaws. Firstly, the structure of the article does not include such generally accepted sections as: introduction, material and methods, results and their discussion. Secondly, Figures 1 and 2 are identical to each other, although they are named differently, the content of Figure 1 does not correspond to its name. In general, the reviewed material has been prepared on an urgent topic, corresponds to the direction of the journal "Taxes and Taxation", has elements of scientific novelty and, as a result, can be published.