The Accounts Chamber determined the impact of on-site inspections on business income

The Accounts Chamber determined the impact of on-site inspections on business income.

The Accounts Chamber compared the profitability of companies in respect of which field tax audits were conducted and those that were not. Based on the results, a report was generated for 2019-2022, from which it follows that the revenue of unverified legal entities was higher than that of those visited by the tax authorities. The auditors also noted that the share of unsuccessful audit activities, as a result of which additional taxes were not assessed, amounted to only 5.4% in 2021. However, this is slightly more than in 2019, by six tenths.

The analysis was carried out for companies in respect of which decisions were made in 2019, and the audits themselves were carried out in 2017-2018. For each organization, the specialists of the Accounts Chamber selected an “analogue” from unverified firms, that is, a legal entity with similar characteristics. Based on the results of such a study, it was found that revenue indicators are greatly reduced after on-site inspections of the Federal Tax Service.

For example, a check in a company began in 2017, and its revenue exceeded the income of an unverified company by 15%. Since 2018, the indicator has already decreased by almost 13% compared to the second company, and in 2021 by 15%. From this, the Accounts Chamber concludes that the audit affected the amount of revenue.

The auditors also found that the change in profits correlated with the size of the business and the type of activity. Micro-enterprise revenue suffers more, with a 33% difference between audited and non-audited companies. The Accounts Chamber noted that in 2018-2020, the income gap was not so significant and was limited to about 25%. On-site inspections were also reflected in the turnover, for those subjected to inspections it was recorded 3% lower (but the figure was decreasing, in 2018 the difference in turnover was 10%).

At the same time, on-site inspections are not reflected at all on the revenue of large enterprises, it follows from the conclusion of the Accounts Chamber, they do not lose their income and retain an advantage in revenue over unverified legal entities. The influence of inspections is stronger on trading enterprises, while production companies feel their effect to a lesser extent.

The FTS explained in an official comment that the audits affected only about one in a thousand taxpayers. The Accounts Chamber admitted that its conclusions are rather conditional. An explanation for the impact of inspections on the profitability of microenterprises may be the greater involvement of firm owners in activities to the detriment of business.

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