Digitalization in the Russian Federation: current problems and solutions in the field of tax audits

Evloeva Alina Borisovna Student, Department of Economic Security and Taxation, Southwest State University 305040, Russia, Kursk region, Kursk, ul. 50 Let Oktyabrya, 94 alinkursk@gmail.com Other publications by this author     Rykunova Valentina Leonidovna ORCID: 0000-0003-1875-0152 PhD in Economics Associate Professor of the Department of Economic Security and Taxation, Southwest State University 94 50 Let Oktyabrya str., Kursk, Kursk region, 305040, Russia valentina0209@mail.ru

Goryainov Andrei Alekseevich Postgraduate student, Department of Economic Security and Taxation, Southwestern State University 94 50 Let Oktyabrya str., Kursk, Kursk region, 305040, Russia Agoryaynov475@yandex.ru

Introduction

In the modern economy, the tax system is one of the key elements of government regulation. Its effectiveness is largely determined by the quality and efficiency of tax control. In turn, the active introduction of digital technologies into the economic life of society makes it possible to modernize the tax control system and make it more flexible and adaptive to changing conditions. The purpose of the study is to identify current problems and determine the optimal ways to solve them in the field of tax control in the Russian Federation in the context of digitalization. To achieve this goal, it is necessary to solve the following tasks: to study the theoretical foundations of tax control; to analyze the specifics of the organization of tax control in the digital economy; to assess the effectiveness of the existing tax control system in Russia; to identify problems and shortcomings of the current tax control system; to propose ways to improve the tax control system taking into account current trends and opportunities for digitalization. The object of this work is tax control in the Russian tax system, and the subject is the organization and implementation of tax control in the context of digitalization of the Russian economy.

The study is relevant due to the need to study the specifics of the organization of the tax control system at the current stage of the development of the digital economy in order to increase the efficiency and transparency of tax relations. The current tax control system serves as the foundation for the economic growth of the state, stimulates the development of entrepreneurial activity and contributes to ensuring stability. Tax control is one of the most important elements of the system of state regulation of the economy. It is aimed at ensuring the completeness and timeliness of tax payments, as well as the identification and suppression of tax offenses.

Characteristics of tax control in the Russian Federation

Tax control is implemented by the activities of tax authorities, which are based on reasonable specific techniques, tools and methods used in the exercise of control functions. The form of tax control is a way of concrete expression and organization of control actions (Figure 1).

Figure 1 - Forms of tax control in the Russian Federation

The tax authorities conduct the following types of tax audits of taxpayers, payers of fees, payers of insurance premiums and tax agents:

- in-house tax audits;

- on-site tax audits ^{[1, p.13]}

- checking the completeness of the calculation and payment of taxes in connection with transactions between related parties.

The purpose of desk and on-site tax audits is to monitor compliance by the taxpayer, the payer of fees, the payer of insurance premiums or the tax agent with the legislation on taxes and fees. Let's look at the main differences between desk and field inspections in table 1.

Table 1 – The main differences between desk and on-site inspections

Source: compiled by the author on the basis of data ^[2].

An on–site tax audit is a much more complex, lengthy and negative event for the taxpayer than an in-house audit.

It should be noted that financial policy and its function in public administration is extremely important, since it covers all aspects of the formation of the national economy ^{[3, p.299]}. Figure 2 shows the structure of the receipt of basic taxes to the consolidated budget of the Russian Federation for 2020 – 2022 ^[4].

Figure 2 - Structure of tax revenues in the consolidated

the budget of the Russian Federation for 2020 - 2022, %

An analysis of the tax revenues of the consolidated budget of the Russian Federation allows us to conclude that taxes and fees for the use of natural resources occupy the largest share in their structure. It is important to note that the value of this indicator varies significantly over the years under consideration. The second place in the structure of tax revenues of the federal budget belongs to the value added tax and income tax. The share of income tax in the structure of tax revenues has been generally stable over the years under review. The minimum value of this indicator is noted in 2022 and is 35.59%, and the maximum value is 41.3% and was recorded in 2020.

Thus, it can be concluded that during the analyzed period there has been a positive trend in the growth of tax revenues to the consolidated budget of the Russian Federation, the same trend persists for certain types of taxes.

Taxes are the main source of income for states, which makes the country's tax system one of the most important mechanisms of public administration ^{[5, p. 26]}. At the same time, the tax control system contributes to the prevention of tax offenses, which is an important factor in ensuring the economic security of the state. Let's analyze the conduct of desk tax audits for the period 2020-2022.

Table 2 – Dynamics of the results of the conducted desk inspections for 2020-2022, in thousands of rubles.

Source: compiled by the author on the basis of data from the Federal Tax Service of Russia https://www.nalog.gov.ru/

As can be seen from the data presented for 2022, the Federal Tax Service of Russia conducted 55097597 units of desk tax audits, which is less than the value of 2020 by 6428626 units. At the same time, the number of detected violations increased by 308,117 during the analyzed period. According to the results of desk control, 94447388 thousand rubles were accrued in 2022, which is 42,2010,758 thousand rubles more than in 2020. These facts are associated with a decrease in the number of declarations submitted by taxpayers, a decrease in the proportion of "zero" declarations, as well as a decrease in the number of legal entities with signs of non-functioning. Tax inspections try to become invisible to taxpayers, that is, not to interfere with their activities, tax authorities are interested in taxpayers coming out of the shadows and becoming open.

On-site tax audits are carried out by on-site tax audit departments, which conduct tax audits of taxpayers, comparing data from tax returns, balance sheets, calculations, etc., with actual documents at the enterprise ^{[6, p.121]}. In the process, the conduct of the company's activities in accordance with the legislation on taxes and fees is checked ^[7].

Based on the data from the 2-NC report "On the results of the control work of tax authorities", we will analyze the results of on-site tax audits. Information on the conducted on-site tax audits is presented in table 3.

Table 3 – Results of on-site tax audits conducted in the Russian Federation as a whole for 2020 - 2022

Source: compiled by the author based on data ^[8]

Over the past 3 years, the number of on-site tax inspections in Russia has increased by 3,688 units, but only 5 out of a hundred inspections do without fines. The increase in the number of on-site tax audits is associated with the tendency of increasing administrative pressure on tax payers from the Federal Tax Service of the Russian Federation, when the state exercises more active control over tax obligations ^[9]. In 2020, due to the spread of coronavirus infection in the territory of the Russian Federation, on-site tax inspections were suspended until May 1, 2020. (Instruction of the Government of the Russian Federation dated March 18, 2020). The number of on-site tax audits in 2020 decreased by a third due to the introduction of a moratorium on their conduct. According to the results of on-site inspections, 675,211,756 thousand rubles were additionally accrued in 2022.

Analysis of the effectiveness of tax control in the Russian Federation

The dynamics of the indicator of additional charges per effective desk audit is an important indicator of the effectiveness of tax control and the quality of inspections. Considering this indicator, it is possible to get an idea of how the amount of additional charges changes according to the results of inspections in dynamics, to identify trends and patterns ^{[10, p.183]}. This, in turn, allows us to identify areas for improving tax audit procedures, developing new control methods and improving the overall performance of tax authorities. Consider this indicator in Figure 3.

Figure 3 – Dynamics of the indicator of additional charges for one effective desk check in 2020-2022, thousand rubles.

The dynamics of additional charges for one effective desk check is positive, and the indicator amounted to 35.07 thousand rubles in 2022, but the indicator is at a low level. Of the 100 desk inspections in 2021-2022, only 5 revealed violations.

The dynamics of the performance indicator of desk tax audits for 2020-2022 is presented in Figure 4.

Figure 4 – Dynamics of the performance indicator of desk tax audits, %

According to the indicator of the effectiveness of desk tax audits, there is a negative trend, in 2022 it amounted to only 4.89%. However, the absence of identified violations on them may also indicate the high quality of the work of tax authorities in terms of informing taxpayers about changes in tax legislation, rules for filling out and deadlines for submitting tax reports, improving financial literacy of the population and entrepreneurs, which is also an important function of tax authorities. Also of great importance in tax control is the indicator of the quality of the inspections carried out ^{[11, p.205]}. It expresses the legality of additional tax payments based on the results of tax audits.

It should be noted that the analysis carried out by the tax authorities during the desk audit is used when planning an on-site tax audit ^{[12, p.127]}. Therefore, when considering the indicators for assessing the quality of in-house inspections, it is necessary to take into account the results of in-house tax audits that affected the additional charges for on-site tax audits.

The dynamics of additional charges for one on-site inspection shows the change in the amount of additional charges as a result of on-site inspections over time, allows you to identify trends and dependencies, identify areas for improving tax control, developing new methods and increasing its effectiveness. Consider this indicator in Figure 5.

Figure 5 – Dynamics of the indicator of additional charges for one effective on-site inspection for 2020 - 2022, million rubles.

As we can see, the dynamics of the indicator of additional charges for one effective on-site inspection is growing. Accordingly, the amount of additional charges for one effective on-site inspection is increasing, a significant increase can be noted in 2022, so the amount of additional charges for 1 on-site inspection in 2022 amounted to 71.73 million rubles. 

The dynamics of the performance indicator of on-site tax audits for 2020-2022 is presented in Figure 6.

Figure 6 – Dynamics of the performance indicator of on-site tax audits in 2020-2022, %

As we can see, the performance indicator of on-site tax audits is increasing and amounts to more than 95.57% in 2022, that is, 95.57% of on-site tax audits ended with the detection of violations. And although in 2020 there was a moratorium on on-site control, the effectiveness of on-site inspections in Russia over the analyzed period of time remains at a very high level ^[13].

Having analyzed this information, we can say that on-site inspections are the most effective form of tax control. The high efficiency of on-site tax audits is primarily due to the fact that tax inspectors have free access to all documents of the organization and, therefore, can study them in detail ^{[14, p.63]}. This allows you to form an evidence base for all existing offenses.

Current problems in the field of tax control and ways to solve them

With the development of digital technologies, it has become more difficult to track and control the tax obligations of companies and individuals. Authorities may face challenges in monitoring electronic transactions, cryptocurrencies and other digital assets. Changes in tax legislation and the complexity of its interpretation may create difficulties for companies and individuals in meeting tax obligations. Ensuring clarity and transparency in legislation can help improve compliance.

Some forms and methods of tax control provided for by the Tax Code of the Russian Federation are outdated and ineffective ^{[15, p.230]}. In particular, conducting tax audits is a rather laborious and costly process, and the results of tax audits are not always reliable. Also, not all tax officials have sufficient knowledge and skills to carry out tax control ^[16]. In particular, they do not always possess modern methods and means of detecting violations of tax legislation. In some cases, questions related to what tax incentives and incentives are provided to companies and individual industries may cause discussions about the fairness and effectiveness of such measures.

Also, one of the problems is the imperfection and insufficient automation of tax systems. This leads to frequent errors and delays in processing information, as well as opportunities for fraudulent actions. To solve this problem, it is necessary to invest in the development of digital platforms and software, as well as provide training and support to tax officials.

Another problem is the lack of transparency and accessibility of information about tax audits for taxpayers. This creates uncertainty and makes it difficult to comply with tax obligations. To solve this problem, it is necessary to develop a centralized electronic platform where payers will be able to receive information about the inspections being carried out, the timing of their conduct, as well as provide the necessary documents in electronic form.

In the context of digitalization, many countries are implementing various measures to improve tax control and combat tax crimes. Countries such as Singapore, Estonia and the Netherlands have developed digital platforms to simplify the tax reporting process. These platforms provide convenient access to tax data, simplify the process of filling out tax forms and allow tax authorities to more effectively control the tax base ^{[17, p.56]}. The United States, Great Britain and Canada are actively implementing data analytics and artificial intelligence to identify tax crimes. Machine learning algorithms help automate the analysis of tax data and identify anomalies, which makes the control process more efficient.

Also, many countries actively cooperate with each other to exchange information on financial transactions and tax data. For example, the Financial Account Information Exchange (CRS) program helps countries detect and crack down on tax evasion and income concealment abroad. In the context of digitalization, it is especially important to ensure the protection of tax data from cyber attacks ^{[18, p.115]}. Many countries, including Germany, Japan and Sweden, are investing significant resources in improving the cybersecurity of tax systems, including the introduction of modern encryption technologies and data protection mechanisms.

Turning to the Russian Federation, it is important to apply similar approaches to improve tax control. It is important to regularly update security systems and use advanced encryption methods. It is also necessary to provide training to tax officials on cybersecurity issues in order to minimize threats from intruders. It is necessary to develop and implement reliable mechanisms for verifying the reliability of the information provided. This will help reduce the possibility of document forgery and improve the quality of tax data.

It is also worth paying attention to the development and application of analytical tools and artificial intelligence ^[19]. These technologies can help automate the data analysis process, identify inconsistencies and anomalies, and optimize the sample for tax audits.

Finally, it is important to provide training and support to tax officials. The introduction of digital technologies requires new knowledge and skills, so it is important to conduct training and organize regular updates for staff.

In general, the following strategies can be used to solve possible problems:

- Technological innovations: the introduction of modern technologies to improve the monitoring and control of tax liabilities. This strategy involves the use of modern technologies to improve the monitoring and control of tax liabilities. For example, the introduction of digital accounting and monitoring systems can significantly simplify the process of collecting and analyzing data on tax payments, reduce the likelihood of errors and improve the overall efficiency of tax authorities.

- International cooperation: cooperation between countries to develop common tax standards and protocols.  Such cooperation helps to prevent tax fraud associated with the movement of capital and profits across borders, and creates more equitable conditions for business on an international scale.

- Education and transparency: raising awareness of tax obligations and creating a more transparent tax system. Creating a more transparent tax system and accessible tax information can reduce uncertainty and promote greater tax integrity.

- Simplification of the tax system: elimination of excessive complexity of tax legislation to improve its compliance. Simplification of tax procedures and elimination of excessive rules and restrictions help to make the system more understandable and accessible to all participants in the economy. It also reduces the opportunities for tax fraud by reducing the number of loopholes and gaps in legislation. ^{[20, p. 42]}.

- professional development of tax officials. The organization of training for tax officials in modern methods and means of detecting violations of tax legislation helps them to respond more effectively to tax violations. This may include both technical training on the use of new technologies and software, as well as training on the development of professional skills in the field of tax control.

- development of new forms and methods of tax control. It is necessary to introduce new forms and methods of tax control based on modern technologies and methods ^{[21, p.250]}.

- to introduce methods of big data analysis and artificial intelligence methods to identify violations of tax legislation. The use of modern data analysis and artificial intelligence technologies helps tax authorities process large amounts of information and identify hidden patterns and anomalies. For example, machine learning algorithms can be used to build models that predict the likelihood of tax violations based on historical data. This will allow the tax authorities to use their resources more efficiently.

Conclusions

In the context of the active development of information technologies and the transition to electronic document management, there is a need to modernize existing control mechanisms and develop new approaches to solving problems related to tax evasion and income concealment. The identification and disclosure of tax offenses is a difficult and time-consuming task. It requires the tax authorities to be highly qualified, professional and use modern methods and tools. Various methods and means used by tax authorities for this purpose were analyzed.

Desk tax audits are an effective control measure and their number has decreased over the past 3 years. At the same time, on-site inspections are currently the most effective form of tax control. But it should be noted that the analysis carried out by the tax authorities during the desk audit is used when planning an on-site tax audit. Therefore, when considering the indicators for assessing the quality of desk audits, it is necessary to take into account the results of desk tax audits that affected additional charges for on-site tax audits.

To improve the effectiveness of tax violations detection, the following measures should be taken:

- improvement of regulatory and legal regulation in the field of detection of tax offenses related to the use of digital technologies in the field of online commerce.

-implementation of big data analysis methods in order to identify tax violations;

-ensure compatibility and integration of various automation systems used in tax audits. This will automate processes, simplify the exchange of information and improve the efficiency of tax authorities.

- the state should actively invest in the development of digital technologies and the modernization of the tax system. This will improve the efficiency of checks, improve the accuracy of information processing and reduce the opportunities for fraud.

The implementation of these measures will improve the effectiveness of tax control in the context of digitalization and ensure the protection of the economic and financial security of the state.