Tax administration reform leads to revocation of business trip certificates

The Federal Tax Service (FTS RF) together with the Ministry of Finance of the Russian Federation has prepared a “roadmap” “Improvement in tax administration”, which is going to be implemented in 2014.

Today in the century of information and communication technology development certain forms of tax reporting seem to be surplus. By 2018 revocation and simplification of some of them will lead to significant cutting of preparation time. Still, the situation is far from perfect. Thus, according to rating “Conduct of business”, annually published by the World Bank, Russia has taken 56 place in 2013, having improved its position on 8 places per year. The rating estimates the countries by three components: total tax rate, amount of payments and time, spent on calculation and payment of tax.

The roadmap was made in order to ease the so-called “administrative barriers” for conducting of business. It includes the next main points, proposed for consideration and passage of it legislatively:

  • disclosure of tax correlation; earlier these documents were internal in the FNS, now they will be published in open access;
  • creation of a single shipping document, which will unite invoice and other documents, revocation of surplus reporting forms, including business trip certificates as late as 2014;
  • change of rules for maintaining accounting records will be published for at least 6 months before the date of entry into force. If it is published at a later time, the deadline of declaration should be extended;
  • organization of preliminary tax explanation (tax consulting) institution in the country;
  • extension of terms of filing accounts up to 5 days, for electronic report – up to 10;
  • reduction in number of required fields for transfer of taxes and charges;
  • permission for employers with payments of social security benefits and leave allowances to be responsible for paying of the income tax simultaneously according to paid sum of benefits and leave allowances during a month;
  • exclusion of duplicative requests of the tax account, being furnished to taxmen earlier;
  • conducting as many as possible operations in electronic form in the course of cooperation of the tax authorities and taxpayers.

If corresponding initiative finds government support, then implementation of the roadmap will surely be a positive signal for business and it will finally improve investment climate in the country.

Leverage ratio of tobacco production manufacturers

Information agency Credinform prepared а ranking of leverage ratio of tobacco production manufacturers. The ranking list includes industry’s largest companies and is based on turnover as stated in the Statistics register, with the reference period of 2012. The first 10 companies, selected by turnover, later were ranked by increase of leverage ratio value.

Leverage ratio is calculated as the relation of borrowed and own funds of enterprise financing. The ratio belongs to a group of indicators, characterizing the structure of company’s capital. In other words, it helps to estimate the degree of company’s independence from loans. Ratio’s recommended value shouldn't exceed unity, otherwise speaking, borrowed funds shouldn't exceed the own funds. Many economists believe, that the optimal ratio’s value is 0,5 - when borrowed and own funds are equal. Thereby too low ratio’s value is considered as the missed opportunity of company’s capital profitability improving by attraction of third-party sources of financing.

Leverage ratio and solvency index of the largest on turnover tobacco production manufacturers, TOP-10
Legal form of organization Name INNRegionTurnover 2012, mln. RUB.Leverage ratio, (х)Solvency index GLOBAS-i®
1 CJSC Liggett-Ducat
INN 7710064121
Moscow 18 493 0,27 207 (high)
2 LLC Cres Neva
INN 4720011412
Leningrad region 3 886 0,34 204 (high)
3 CJSC Imperial Tobacco Yaroslavl
INN 7601000015
Yaroslavl region 3 241 0,74 225 (high)
4 CJSC Philip Morris Izhora
INN 4720007247
Leningrad region 59 299 0,75 159 (the highest)
5 LLC Imperial Tobacco Volga
INN 3443033593
Volgograd region 8 012 1,03 203 (high)
6 JSC Donskoy tabak
INN 6163012571
Rostov region 8 927 1,16 205 (high)
7 JSC Philip Morris Kuban
INN 2311010485
Krasnodar region 9 912 1,36 211 (high)
8 ZAO Donskoy tabak
INN 6162063051
Rostov region 3 079 4,62 258 (high)
9 CJSC British American Tobacco-SPb
INN 7809008119
Saint-Petersburg 31 932 13,3 196 (the highest)
INN 3223000539
Bryansk region 1 460 85,99 269 (high)

According to experts, about 86% of Russian tobacco market is controlled by multinational corporations. The share of domestic manufacturers is small and their main activity is – production of economy brands.

According to 2012 results, the first place of ranking list takes CJSC Liggett-Ducat with the leverage ratio of 0,27. The company’s management, with rather low share of borrowed funds, has managed to become the third within the industry. Perhaps, increase in the share of third-party sources of financing will promote the improvement in financial results. The company has the high solvency index GLOBAS-i®. That characterizes it as financially stable.

The second place of ranking list takes LLC Cres Neva with the leverage ratio of 0,34. Despite the fact, that the company is in the TOP-10 list of the largest companies in terms of turnover and it has the high solvency index GLOBAS-i®, the company’s management should think about growth of borrowed funds share in order to increase profitability.

Probably the most interesting situation has industry’s leaders - CJSC Philip Morris Izhora and CJSC British American Tobacco-SPb. The companies show essentially different attitude to business source of funding organization, having the highest rates of revenue for 2012, 59 299 and 31 932 mln. RUB. respectively. Thus, the industry’s leader in terms of turnover - CJSC Philip Morris Izhora has the leverage ratio of 0,75, that corresponds to the standard recommendations. The second industry’s company in terms of turnover - CJSC British American Tobacco-SPb has the leverage ratio of 13,3. That is much more than 1 and testifies of overabundance of borrowed funds in company’s sources of financing structure and dependence of such business on external sources of loans. However, both companies have the highest solvency index GLOBAS-i®. The risk of debt default is - minimum. Thus, for comprehensive and full assessment of the company’s financial position, you should consider the total number of various financial and non-financial factors. It should be noted, that the assessment, based only on 1 indicator, would be incomplete and biased.