The concept of monitoring the tax risks of the state in the context of the digital economy

Stankovskii Maksim Vladimirovich ORCID: 0000-0003-0787-6147 Graduate student; Faculty of International Economic Relations; Financial University under the Government of the Russian Federation 5 Lesnaya str., Moscow, 127349, Russia maksj37@gmail.com Other publications by this author

Introduction

The current stage in the development of socio-economic relations is characterized by the improvement and development of digital technologies, which significantly contribute to increasing economic growth and improving the well-being of the population of individual States. Nevertheless, the digitalization of economic processes contributes to the emergence of fundamentally new threats that can significantly affect various spheres of public life. In this context, the state, as an economic entity, faces a previously unknown category of tax risks caused by the development of the digitalization of the economy. As a result, the main task of the state in the context of comprehensive digitalization is to minimize the economic, political and social consequences of this category of risks.

It is important to note that at this point in time, there is no legally formulated official definition of the category of tax risks. Nevertheless, the term has been widely used both in the scientific field and in the field of practical application of regulatory legal acts.

It is necessary to focus on the fact that, for the most part, economic scientists and practitioners in the field of taxation consider tax risks through the prism of the activities of an economic entity, linking their essence with the risk of incorrect and incomplete fulfillment of tax obligations and subsequent tax control by tax authorities ^[1]. As a result, specific methods and methods of tax optimization are being developed in order to mitigate these risks through the use of tax planning and consulting mechanisms.

Nevertheless, tax risks may be reflected not only in the activities of individual taxpayers. This economic category has an impact on all participants in tax relations, including the state. Let's formulate the concept of state tax risk.

The tax risk of the state is an economic category that arises between subjects of tax relations and is determined by the likelihood of certain economic consequences (both positive and negative). At the same time, a characteristic feature of tax risks is the subjective and objective nature of their occurrence. The subjective component is determined by specific decisions of state authorities regarding tax regulation, in turn, the objective component depends on general trends inherent in various spheres of public life, for example, digitalization and automation of economic processes.

The problem of identifying and managing tax risks at the macro level attracts the attention of a significant number of economic scientists. The key aspects regarding the sphere of tax risks of the state are formulated in the works of Goncharenko L. I. and Maiburov I. A. ^[2-3]. It should be emphasized that certain categories of risks caused by the process of digitalization of the economy are considered in the works of the following domestic economic scientists: Advocate A. S., Tyurikova A. G., Novoselova K. V., Malkova Yu. V., Vishnevskaya N. G., Polezharova L. V., Kostin A. A., Andreeva A. N., Zaponkina A. A. ^[4-5].

Thus, the tax risks of the state in the digital economy carry new challenges and problematic aspects in the framework of the implementation of the state's tax policy at the macro level. In order to minimize and subsequently eliminate negative consequences for the state, it is advisable to monitor current tax risks. Proper organization of the monitoring system will ensure timely identification of tax risks in order to further develop mechanisms for their management and assessment.

The theoretical foundations of monitoring the tax risks of the state

Monitoring is a key area in the framework of tax risk management at the macro level. The essence of this process is to form a system of measures that allow continuous monitoring of a specific object under study in order to further develop management mechanisms. In addition, monitoring serves as a basis for assessing the factors influencing the object or phenomenon under consideration.

Currently, the Russian Federation has not developed a unified system for monitoring tax risks. In addition, tax risk monitoring has virtually no regulatory framework.

It should be noted that tax monitoring pursues two types of goals – strategic and tactical. The strategic goals are focused on achieving the effective functioning of the tax system as a whole. In turn, tactical goals are aimed at obtaining the most objective information within the framework of operational government regulation. In addition, information about imperfections in tax legislation may be the result of achieving tactical monitoring goals.

It is important to emphasize that tax risk monitoring has certain functions, as shown in Figure 1.

Source: compiled by the author independently based on materials ^[6].

Figure 1. Tax risk monitoring functions

It should be noted that the essence of the information function is to provide operational information to government authorities regarding the functioning of the tax system as a whole. In addition, this function allows you to quickly identify problematic aspects of the application of tax legislation and its imperfections. In turn, the analytical function is designed to analyze and assess the reasons for the discrepancy between the actual tax revenues to the budget system of the Russian Federation and the planned values determined by the authorized bodies.

The management function involves making specific decisions in the field of tax risk management based on data obtained as part of a preliminary analysis and assessment of the functioning of the tax system. The control function is the process of comparing the actual amounts of tax revenues with the planned values.

Thus, monitoring is a key component of the system for identifying and managing government tax risks at the macro level. The effectiveness of this mechanism is achieved by stepwise completing a number of tasks that can be represented as a specific algorithm.

Based on the relevance of the topic under study, it is proposed that it is possible to develop a unified concept for monitoring the state's tax risks, some elements of which can potentially be reflected in practice as part of the implementation of the state's tax policy.

For a visual representation of the concept of tax risk monitoring, let us refer to the information provided in table 1.

Table 1 – The concept of monitoring the tax risks of the state

Source: compiled by the author himself.

For the purpose of a comprehensive analysis, we will consider the practical application of the presented concept of monitoring the tax risks of the state.

Practical use of the concept of tax risk monitoring

As part of the digitalization of the economy, additional problematic aspects arise for the state in managing the tax system. This fact is due to the emergence of a category of tax risks caused by comprehensive informatization and automation of economic processes. In general, the tax risks of the state can be represented by the following provisions:

- reduction of the tax base, which, in turn, leads to a decrease in government revenues;

- deterioration of the investment climate and the level of socio-economic development of the state;

- the complexity of taxpayer administration in the context of digitalization;

- ambiguity in the choice of methods for managing the tax risks of the state within the framework of the digital economy ^[7].

It should be noted that the category of tax risks is peculiar not only to the domestic tax system. This issue has been troubling scientists around the world for the past decades. The European community pays special attention to the tax risks caused by digitalization ^[8].

For decades, taxation of large corporations has provided significant amounts of tax revenue, which has been used by the State to fulfill its primary function of creating public goods. These receipts were generated not only by corporate income tax, but also by levying other mandatory payments. Property and land taxes and environmental charges can be cited as examples of such payments. Nevertheless, the gradual digitalization of economic processes has allowed companies to find various ways to reduce and offset tax liabilities. As a result, the volume of tax revenues in the digital sector of the economy steadily decreased, which negatively affected the formation of revenue items in the state budget.

In order to reflect this situation in practice, it is advisable to analyze the data presented in Figure 2.

Source: compiled by the author independently on the basis of data from the European Commission.

Figure 2. Effective average corporate income tax rate of the European Union for 2023, %

The presented graphic object contains information regarding the value of the effective average tax rate on corporate income engaged in economic activity in the territory of the European Union. For a comparative analysis, a sample of taxpayers from various sectors of the economy was conducted. It is important to note that the effective tax rate characterizes the ratio of the actually calculated tax to the tax base. In other words, this indicator demonstrates the real tax burden.

Based on the data shown in Figure 2, it can be determined that the real tax burden of international and national companies belonging to the traditional sector of the economy is 23.8% and 21.8%, respectively. At the same time, the effective tax rate for organizations in the digital sector of the economy is only 8.3%, while for companies in the B2C and B2B sectors it is 10.6% and 8.9%. Thus, it is obvious that the tax burden of organizations in the digital sector is much lower than the same indicator for companies from other sectors of the economy.

It is important to emphasize that reducing the effective tax rate and reducing the number of potential taxpayers leads to a decrease in budget tax revenues. As a result, the state seeks to compensate for the shortfall in income by increasing the tax burden on taxpayers remaining in the tax area. This trend is widespread and is also characteristic of the economy of the Russian Federation.

The process of digitalization of the economy has significantly affected business models, this is especially evident in the activities of non-resident organizations. It should be noted that these companies have previously had the opportunity to sell their own goods and services on the territory of other states without an actual presence, but the digitalization of economic processes and the development of information and communication technologies have served as a driver for increasing the volume of such trade.

Traditionally, organizations claiming to occupy a certain part of the market in another country required an actual presence. This fact is due to the fact that companies needed to organize the production process, establish a distribution system, and conduct a competent development of marketing policy and branding, taking into account the specifics of a particular country. In turn, for the state, this activity ensured the emergence of taxable income and, as a result, tax revenues ^[9].

Nevertheless, the development of business models and the digitalization of economic processes have allowed entrepreneurs to optimize processes that previously required an actual presence in a particular territory. In this regard, additional risks arise for the state caused by problems in determining the amount of taxable income attributable to a particular jurisdiction. In this scientific work, the mentioned category of risks should be attributed to the tax risks of the state in the framework of taxation of organizations engaged in cross-border trade in electronic services.

Thus, the solution of the first two tasks stipulated by the concept of monitoring state tax risks made it possible to identify the tax risk caused by digitalization and changing business models, as well as to assess its significance by analyzing the effective corporate income tax rate using the example of companies in the European Union.

State tax risk management mechanisms

The final stage in the framework of the concept of monitoring the tax risks of the state is the development of tax risk management mechanisms.

In the context of comprehensive digitalization and informatization of economic processes, competent management of tax risks at the macro level is coming to the fore. As noted earlier, tax risk management is based on the use of specific mechanisms that help reduce the likelihood of adverse consequences within the tax system of the Russian Federation. As a result, updating these mechanisms in accordance with current economic development trends is of fundamental importance for ensuring the socio-economic stability of the state.

In order to offset the tax risk of the state in the framework of taxation of organizations engaged in cross-border trade in electronic services, it is proposed to introduce the institution of a digital permanent representation. This mechanism will ensure that taxes are levied on the income of foreign companies providing services to domestic consumers. It is proposed to define this institution as follows: a digital permanent establishment is a place of activity through which an organization conducts its activities in whole or in part, including the state or territory of its digital presence, in which it has its main source of users, and a place of primary income. The relevant amendments are proposed to be made to Article 306 of the Tax Code of the Russian Federation.

It should be noted that this issue is reflected in the international practice of taxation. For example, in India, a company that does not have a physical presence in the country, but performs transactions in the amount of 2 crores or more (20 million rupees) and has more than 3 million users, creates a digital permanent representative office and is subject to a transnational tax. In 2018, the European Commission proposed to supplement the definition of a permanent mission with the term "digital permanent mission", which arises if the annual turnover of a digital platform exceeds 7 million euros, 100,000 citizens of European Union member states are registered on it, or more than 3,000 contracts for the provision of electronic services to EU residents were concluded in the reporting period ^[10].

Obviously, in order to create a digital permanent representative office, it is necessary to take into account a number of factors characterizing the activities of a foreign organization in the territory of the Russian Federation, among which the following provisions can be distinguished: income generation, digital presence and the number of users.

In this case, it is necessary for the state to ensure an effective system of administration for foreign taxpayers. It is proposed to register permanent electronic representative offices remotely using existing services of the Federal Tax Service of Russia or by creating new applications, for example, the Digital Permanent Representative Office service ^[11]. This function will allow you to quickly determine the need to create a representative office based on the data regarding the factors mentioned earlier. In order to exchange information with tax authorities and file tax returns, it is proposed to use the "Personal Account of a foreign organization" service.

Obviously, only a foreign company providing services has information about the actual share of income and the number of consumers in a particular tax jurisdiction. As a result, registration of a permanent electronic representative office will initially be subjective and voluntary. In order to identify the main foreign suppliers of electronic services to the domestic market and subsequently impose corporate income tax on them, the state needs to ensure the creation of attractive and comfortable business conditions.

To resolve this issue, it is necessary to create a simplified procedure for registration and administration of foreign companies when they provide electronic services to the territory of the Russian Federation. In addition, a number of tax and non-tax benefits can be provided, for example, to reduce the corporate income tax rate or to provide simplified citizenship for employees of foreign organizations. It is proposed to consider the possibility of setting the income tax rate for foreign organizations that have registered a digital permanent establishment at 8%. The amount of tax calculated at the indicated rate is proposed to be fully credited to the federal budget.

The set of proposals mentioned above will make it possible to determine the amount of actual income received by foreign organizations on the territory of the Russian Federation, with a view to subsequently taxing them on corporate profits according to the general rules. In addition, these measures will ensure the mitigation of government risks associated with the administration of cross-border trade in electronic services.

At the same time, solving the problem of tax risks of the state is an important area of research for domestic and foreign scientists. At the same time, scientific views on the issue under consideration may vary depending on the field of scientific interests. To a greater extent, this is due to the choice of the level of tax risk management of the state. For example, A. S. the Prosecutor focuses on the need to develop a tax risk management system at the state level, focusing on improving the forms of interaction between subjects of tax legal relations ^[12]. Artemenko A.D. and co-authors focus on private methods of regulating tax risks: the development of unambiguous tax legislation and its timely implementation; strengthening tax control to identify unaccounted-for taxable objects and exclude non-taxable objects; stable level of the total tax burden and minimization of tax payments ^[13]. In turn, T. V. Zvereva links the leveling of tax risks of the state with a revision of the principles of taxation and a change in tax policy in order to maintain the target level of tax collection ^[14]. Within the framework of regulating tax risks at the supranational level, the scientific research of Tikhonova A.V. is of the greatest interest. In particular, the author identified the tax risk caused by the erosion of the tax base from e-commerce outside the place of income generation, and developed a system for managing state tax risks ^[15].

Conclusion

According to the results of the conducted research, it can be argued that the purpose of scientific work has been achieved, and the tasks have been completed. In particular, a theoretical analysis of the tax risks of the state in the context of digitalization was carried out, the definition of this economic category was given, and its characteristic features were noted. In order to manage the tax risks of the state, the scientific work formulates the concept of monitoring the tax risks of the state, which includes primary identification, quantitative and qualitative analysis, assessment of factors and the development of proposals for managing the tax risks of the state at the macro level. In accordance with the proposed concept of monitoring the tax risks of the state, a practical analysis of modern tax risks has been carried out, taking into account international and domestic experience. According to the results of the study, the tax risk of the state has been identified in the framework of taxation of organizations engaged in cross-border trade in electronic services. In order to minimize and offset this tax risk, specific management mechanisms have been developed. In particular, it is proposed to introduce the institution of a digital permanent mission in the Russian Federation. The main conclusions and proposals of the scientific work are compared with the results of academic economists in similar areas of research. Thus, this scientific work may be of interest to a wide range of users due to the detailed study of the issue of building a concept for monitoring government tax risks in the digital economy.