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Prime Minister Vladimir Putin holds a meeting on tax legislation related to transfer pricing

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Vladimir Putin's opening remarks:

Good afternoon, colleagues.

Today, we will speak about a subject that at first glance seems extremely boring, about a subject that likely leads to yawning and at times even irritation among those who have nothing to do with it. Nevertheless, it is a very important issue.

This is an issue without which the life of the state is impossible. Even more, it is so significant that, one way or another, it is even reflected in every single country's classical literature – and ours is no exception.

If we recall one of Alexander Pushkin's chief protagonists, Eugene Onegin, he read Adam Smith and understood how a country gets richer and why it does not need gold when it has a simple product. It does not need it because... Well, it also needs gold, but the notion was that the state levies taxes on a simple product. So we'll talk with you today about taxes. But not about taxes in general, but about so-called transfer pricing and the part that causes concern today. Why? Because nearly every company in every country in the world uses a scheme like transfer pricing. In general, there is nothing objectionable because every business thinks about how to minimise its costs, including tax expenditures.

Problems arise for the state when there are abuses associated with the sale of goods at reduced prices within the country, and when reselling them at reduced prices to affiliated entities in tax havens offshore from where they are sold at the normal market price. This is detrimental to the interests of the state, society and budget.

Unfortunately, in our country, these issues are not effectively regulated. The Tax Code governs this procedure with the relevant articles, and the price difference should be no more than 20% when sold to affiliated entities.

The difference should be no more than 20% of the market price, but it is not clear what interdependent or affiliated entities are and what the market price is. This is not spelled out properly, and this, of course, needs to be streamlined.

We need to make the necessary amendments to the Tax Code to protect the state's interests. Of course, this must be done extremely cautiously, carefully, following the well-known medical rule – do no harm.

We need to make such amendments absolutely transparent, uniformly understood and, most importantly, consistently applied to all economic actors.

Now let's discuss this issue.