Mikhail Mokretsov, the Head of the Federal Tax Service (FTS), reported that collection of Personal Income Tax (PIT) and Profit Tax has fallen in the regions from January to August. "Collections have simply plummeted from 1.5 trillion rubles to 700 million rubles," said Mokretsov, noting that the majority of the fall was seen in profit tax collections.
The situation is serious for the regions, since in previous years PIT and Profit Tax made up 70-80 percent of their budgets, according to Mokretsov. “The opinion of the FTS is that profit should stay where the production facilities are located, and not where it’s more profitable for businesses to pay taxes,” he continued.
Mokretsov says that according to current legislation it is practically impossible to compel large companies to pay taxes where their production facilities are located. An amendment to the Tax Code – specifying that if an enterprise is located in a region, the parent company must also be located there – may help the regions.