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The story of one of the bill

Dmitri KostalginDmitri Kostalgin

The lack of transparency of legislative activity in the Russian Federation has become proverbial. And we are talking here not so much about the process but about documenting and transparency of amendments justifications, expert reports, transcripts of discussions in the committees, etc. And it is the essential justifications, not ‘highly intellectual’ explanatory notes such as: ‘Adoption of the draft would not require financial expenditures of the budget, so we must adopt it’.

And since the said minimal requirements aren’t there, keeping up appearances is not only pointless, but in general they were probably invented by cowards. This fact is quite a significant demonstration of the process of adopting the bill number 675906-6.

So, on December 12, 2014 deputy G. Khor introduced the text of the bill to the State Duma. Paragraphs 2-4 of art. 269 were changed completely, and paragraphs 5-7 were added. Explanatory note says that the bill aims at clarifying the "controlled debt" concepts, namely:

  • extends this concept by incorporating the debt liabilities between any dependent persons, and not only between ‘the mother’ and ‘the daughter’;

  • excludes from the concept the debt to banks, secured by guarantees or assurances of foreign dependent persons.

On January 30, 2015 this text was adopted in the first reading and 7 days are given to make amendments.

New law desepticon

February 13, 2015 appeared Amendments, recommended by the Committee of the State Duma's Budget and Taxes. They imply that no trace of the first reading of the text left.

Now the bill is completely devoted to the amendments in para. 1 art. 269 of the RF Tax Code (the full analysis can be found here).

In just two week’s time the issues of ‘thin capitalization’ have sunk into oblivion. Is there an explanation to such a radical change? No, there isn’t.

Perhaps, it can be explained by ‘expediency’. The amendments to para. 1 art. 269 of the RF Tax Code are more necessary, important, etc. But such explanation is illogical, because, when necessary, additional amendments can be added to the bill. And there are a lot of such examples in practice.

Invesment climate? No, it's only in scientist's books.

Interestingly, many taxpayers have rushed to make changes in tax accounting and risk assessment on the ‘thin capitalization’ after the 1st reading. They believed on Government's bare word.

Well, we beat and beat. Not the first and not the last time.

Has anyone made after this any conclusion? Unlikely. No one is outraged, at best, we have kitchen talkings..

Managing partner of Taxadvisor lawfirm