Kamenkov M.V. Differentiating Cases of Relationship in Tax Law (The Traffic Light Principle) and the Idea of the Single Taxpayer

Abstract: The subject of the present research article is the process of differentiating cases of interdependence depending on their degree of impact on transation terms and economic performance of related parties. According to the author, the arm's length principle needs to be limited in cases when companies' intergration does not have the purpose to avoid taxes. In this regard, the author offers to differentiate cases of relationship depending on the degree of impact of one party on decisions made by the other party, and to define the grounds for taxation of a group of related parties (enterprises) as the single taxpayer. In his research Kamenkov has mainly used: 1) Aristotelian method that has allowed to define differences between relationship cases and to describe the features of the single consolidated taxpayer; and 2) comparative law method that has allowed to compare foreign and Russian approaches to the matter under research. The author of the article offers his own approach according to which related parties can be divided into the three groups depending on their degree of impact: 1) one of the parties can directly influence decisions of the other party (the 'red' light); 2) one of the partices can influence decisions of the other party unless the contrary is proved (the 'yellow' light); 3) one of the parties cannot influence decisions of the other party unless the contrary is proved (the 'green' light). Depending on the degree of impact of one party on the other party's will, the burden of the proof of related influence on business transactions and economic results of the consolidated taxpayer can be distributed. The author of the article also offers his approaches to fixing the single consolidated taxpayer for a group of companies participating in the same operating procedures. 

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