Financial Journal

p. 9-21

Authors: Roman S. Leukhin

In this paper the author compares a number of methods to forecast corporate income tax revenues in the next quarter: autoregressive integrated moving average, exponential smoothing, linear regression, naïve forecast, and combination approaches. Results show that the increase of the time period for the next quarter forecast error calculation leads to the increase of errors for individual models and arithmetic mean, and the decrease for combination approaches which consider forecast errors in previous periods. Linear regression with the MOEX Russia Index as explanatory variable provides the lowest error for the next quarter forecast for 5- and 10-quarter periods. The forecast combination approach, what takes into account the forecast error in previous 4 quarters, provides the best result for a period of 15 quarters, what is explained by diversification of forecast errors. This method can be successfully used for corporate income tax revenue projections and possibly for other budget revenues.

p. 38-54

Authors: Marina Yu. Malkina, Anton O. Ovcharov

The paper provides an overview of the methods and models for quantitative evaluation of the financial instability of economic systems. The authors identify the indicators of financial instability and show their connection with various stress tests, assessing the vulnerability of economic systems to various shocks. The main results of Russian and foreign studies devoted to the development of early warning systems of financial instability, including various leading indicators of currency, debt and banking crises, are discussed. Particular attention is paid to the experience of building an aggregated financial stress index (FSI) and its use as a generalized indicator of financial instability of economic systems. Using the vector model for error correction, the authors construct cointegration equations for three main variables demonstrating a quick response to external shocks: oil price, ruble exchange rate against the US dollar, and the RTS index. The application of the principal component analysis allowed the authors to aggregate adequately the information contained in these variables. Based on the moving average and standard deviation of the principal components’ growth rates, the authors propose a new financial stress index. In addition, with the help of this index the authors obtained estimates of the level of financial stress in the Russian economy from January 2000 up to February 2019 and revealed differences in the nature of financial stress during the 2008–2009 and 2014–2016 crisis periods.

p. 64-74

Authors: Sergei V. Yakunin

The article discusses a number of current problems faced by banks as participants of the financial market during their operation. These problems are analyzed in the context of tasks of improving the efficiency of the Russian economy, taking into account the features of the functioning and further development of the financial market. In this regard, the author examines the reasons underlying the dominance of banks with state participation, and their consequences. The reasons for the increase in their dominance were caused by the preferences received by banks with state participation in the period of financial crises. Further tightening of requirements for financial market participants and ongoing financial support for the largest banks has created a new market structure. The author assumes that the severe restrictions imposed in the EAEU countries on the presence of companies from Russia in their financial markets are due to the fact that Russian credit organizations significantly exceed the national credit organizations of the EAEU countries in terms of assets. The reasons for the symbiosis of the largest insurance companies and banks, and its results are named. The author concludes that the entry of banks to the food and non-food retail market gives the state a unique lever of consumer market management through banks with state participation. The results obtained can be used to create a financial services marketplace. In addition, they can help the mega-regulator develop laws aimed at increasing the banks’ efficiency in the economy.

p. 91-105

Authors: Tatyana G. Arbatskaya

The article describes the main directions of reforming the accounting of accounts receivable and allowance for doubtful accounts of public sector organizations. It also compares the requirements for accounting of accounts receivable and allowance for doubtful accounts in organizations of the private sector of the economy and in public sector organizations, as well as taxation. The author's proposals are aimed at further improvement of the methodology and methods of accounting in the public sector. The author suggests that the list of criteria for doubtful accounts recognition be expanded with a criterion for the absence of receivables security with guarantees provided by law or by contract. In addition, the author sets forth a supplementation of the chart of accounts with a synthetic account for accounting of bad debts reserve and correspondence of accounts for forming and using bad debt reserve and allowance for doubtful accounts. According to the author, the improvements proposed would allow one to take into account receivables and financial results of a given organization in the public administration sector in accounting and financial statements in accordance with the federal standard requirements.

p. 117-127

Authors: Vitalii A. Fedosov, Valeriya V. Bogatchenko

Participatory budgeting is one of the most actively developing forms of public participation in the budget process. Participatory budgeting practices implemented in the Russian Federation differ significantly from each other, which suggests that it is necessary to study further their financial mechanism. The authors has summarized the features of the financial mechanism in the implementation of various practices of participatory budgeting, and has highlighted and described the elements related to the following: implementation of participatory budgeting projects; accompanying participatory budgeting practices; and maintenance of objects created as a result of participatory budgeting practices implementation. The problems that are arising in the process of financing various participatory budgeting practices are systematized, and possible ways of solving them are proposed.

p. 9-21

Authors: Vladimir V. Gromov, Nikolaj S. Milogolov

One of the main goals of the Russian tax policy for recent years is to find some opportunities to reduce the tax burden on small companies. Increase of tax incentives is usually associated with the growth of small business, but the pace of development of this economy sector in Russia is still low and the tax system loses its due degree of simplicity and transparency. Therefore, the subject of the study is the problem of small business taxation in Russia. The article points out that special tax regimes, such as the simplified taxation system and the unified imputed income tax for certain types of activity, have lost their targeted nature to date, since their development has no internal logic and is carried out mainly under the current economic challenges without taking into account the long-term effects of the measures taken. Against this background the purpose of the study is to develop recommendations for improvement of above mentioned special tax regimes. The authors conclude that, on one hand, regular increases in turnover thresholds for the purposes of simplified taxation system is an unpromising tax policy direction and, on the other hand, granting access to the taxation system in the form of a unified tax on imputed income regardless of a taxpayer’s turnover defeats partially the objectives of small business support. In common, this creates the conditions for abuse and therefore requires revision of certain provisions of the Russian tax legislation.

p. 37-50

Authors: Olga V. Bogacheva, Oleg V. Smorodinov

The article focuses on several challenges that OECD countries are currently facing when planning and providing public funding of R&D sphere. These issues are analyzed within more general framework — increase of efficiency of public spending of R&D and Science, Technology and Innovation (STI) sector as a whole. The authors examine application of public R&D funding based on socio-economic classification (Frascati Manual 2015), optimal choice of forms and instruments of R&D public funding, which is linked with desired outputs and socio-economic outcomes, and methodologies of efficiency evaluation of public funding of R&D in OECD. Moreover, the authors draw the conclusion about marked extension of the list and variety of forms, methods and instruments of R&D public funding after 2007-08 global financial crisis. In addition to traditional institutional (block grants) and project financing, new form — Research Excellence Initiative (REI) — has evolved. It combines features of institutional core funding (longtermed, program format, etc.) with competitive organization and outcome orientation. It is especially efficient and effective when the focus is made on exceptional quality of research, interdisciplinary and multi-university studies. Integration of performance budgeting elements in institutional funding (e.g., performance contracts) is another noticeable trend in the evolution of public financing in OECD countries during the last decade. At the same time, the certain limits of project-based financing and application of competitive mechanisms in organization of R&D public funding became more evident, because of shorter terms and more risks associated with such projects. One more conclusion refers to wider application of holistic approach to efficiency evaluation of R&D public funding in OECD countries, when efficiency is evaluated at every stage of R&D process. Results of the research can be used in spending reviews in R&D or STI area as well as in recommendations for increasing efficiency of public governance of these areas.

p. 65-80

Authors: Samvel S. Lazaryan, Ivan V. Nikonov, Anton I. Votinov, Ekaterina A. Gubkova

According to a range of theoretical studies, implementation of fiscal rules implying numerical limits on fiscal aggregates has some advantages over the discretionary measures. Thus, their use leads to the improvement in deficit management and to the increase of macroeconomic stability. Moreover, recent empirical studies on the effect of fiscal rules support the theory. Namely, their use has a positive influence on long-term economic growth and government finances. At the same time, actual experience with fiscal rules has not always been successful, therefore, the rules were exposed to frequent changes and improvements. The article discusses the evolution of the worldwide approaches to elaborate a system of fiscal rules. The main stages of their development are highlighted and the reasons for the observed modifications in fiscal rule framework are analyzed. To characterize the recent tendencies in fiscal rule design the data of international institutions, e.g. International Monetary Fund and World Bank, as well as the national legislation of the countries applying fiscal rules are used. The research shows the increasing popularity of expenditure growth rules tending to be applied in combination with debt and budget balance rules. The complication of debt rules is also registered. The other notable finding is the expanding use of the rules that incorporate an adjustment for economic cycles, which shows the governments’ endeavor to conduct countercyclical fiscal policy. In addition, the rules has become more flexible due to the introduction of escape clauses and autocorrection mechanisms. Finally, the control over compliance with the prescribed limits has become more stringent.

p. 96-108

Authors: Svetlana V. Krivoruchko

Central banks around the world issue banknotes of large face value in response to demand from the public. Understanding of the nature of the cash need in the context of banknotes gradation is very important for predicting their effective emission, not allowing banknotes excess or deficit. Therefore, the aim of this work is to identify the main monetary and non-monetary factors in formation of demand for large face value banknotes, based on the study of the global experience in optimization of the cash circulation structure. The analysis is based on a comparison of the conversion rates of large banknotes in different countries and the factors affecting them. It has been revealed that in countries with high level of economy large banknotes are used to a greater extent as a means of savings, which increases in the period of almost zero interest rates, compared to other countries with less stable currencies, where central banks support higher interest rates. For countries with depreciation of national currency consistent increase in the face value of the largest banknote is typical, while demand on small face value decreases. In the history of monetary circulation reforms in some countries there have been cases of sudden cancellation or replacement of large face values in order to force people to withdraw cash from their stocks, as well as to confiscate illegal wealth. Waiting for such actions from government can distort the demand in cash. The attribution of the national currency to the list of world reserve currencies also stimulates the demand for banknotes of large face value, in particular because such currencies are in use in other countries along with local currencies and are used not only for saving as a “stronger” currency, but also for payments and settlements in large transactions, especially in the shadow economy. Optimization of the cash structure can significantly reduce the costs of circulation. The state can stimulate or weaken the demand for large face values. The fight against corruption with established barriers to illegal trade and trafficking justifies the efforts of some jurisdictions to remove very large banknotes from circulation. At the same time, it is extremely important to ensure transparency and timely notification of the public of making such decisions.

p. 122-130

Authors: Igor E. Mizikovsky

Comprehensive implementation of the planning and accounting function is the primary task of the modern enterprise of the manufacturing industry. Rational use of resources radically changes the strategy of the enterprise, which is of particular importance in modern terms, when the most important is the permanent cost reduction, ensuring compliance with the economically justified resource saving mode. People need a modern method of planned calculation of production cost (work, services), functionally oriented to the rational use of production resources in all processes of the value stream. Thus, the aim of the study is to develop the above methodology, the most “deployed” in the direction of information requests for effective management. The author’s observations of phenomena and processes in a number of manufacturing enterprises, their systematization and classification, system analysis, the use of structural-substrate and process approaches, measurement and results’ synthesis allowed to develop a modern methodology of planned calculation integrated into the information method part of an enterprise.

p. 9-20

Authors: Olga K. Yastrebova

The article examines the issues related to formation and financing of a state assignment in the context of electronic budget and new requirements for justification of standard costs. The author aims to analyze the experience of application of state assignment and standard costs in a new environment, to identify and structure the associated methodological and practical problems, and to justify the proposed solutions. The analysis reveals how substantial is the problem of non-compliance with provision of the regulatory legal framework for the formation of state assignment and standard costs by federal departments. Based on the analysis of new requirements for calculation of standard costs, the author concludes that implementation requires a complex, analytical and methodological work. The article shows that a significant number of departments are not ready for such work in terms of the lack of necessary information about expenditures of their subordinated bodies as well as lack of modern tools for costs accounting. The article also provides the example of successful experience of standard costs formation and specifies the necessary preconditions for that. The author analyzes the features of public services characteristics that influence formation of state assignment and standard costs calculation. In addition, the author proposes to balance requirements for the formation of standard costs with sectoral features and to moderate the existing requirements for standard costs calculation for a number of public services, taking into account objective restrictions. The author emphasizes the necessity to introduce modern tools for costs accounting in public entities.

p. 34-43

Authors: Dmitry N. Ershov

The provision of state guarantees in the planning and implementation of investments is a common instrument of state support and attraction of additional financial sources to large infrastructure projects. On the other hand, risks resulting from government guarantees may adversely affect the sustainability of the budget system. In order to neutralize such risks, a system of investment risk management arising from government support of investments is applied. In recent years to minimize the risks with regard to the budget, many countries undertake legislative and procedural changes related to the provision of state guarantees. The article is devoted to the modern practice of state guarantees provision, while planning and implementing large investment infrastructure projects on the example of Germany and France. Among the considered issues are the legal framework, procedures and conditions for the provision of state guarantees. Certain elements of state guarantees system of Germany and France could be examples for possible introduction in Russia.

p. 56-65

Authors: Ivan V. Nikonov, Arseny S. Sirotkin

The article describes the development features of the retail lending in the Russian Federation after 2015–2016 recession period. The authors indicate the recent trends in the retail credit market through the analysis of mortgage and retail loan markets performance with a breakdown by groups of country regions. Groups of regions are defined by the credit growth ratio and personal income level. The groups of regions have such characteristics as living standards, dynamics of the credit growth and past due debt in different retail lending segments, and household bank deposits. The authors determine the highest retail credit growth in regions with the higher-than-average personal debt-to-income ratio, while the mortgages and retail loans show mostly proportionate dynamics in the overall retail credit growth.

p. 76-87

Authors: Andrey A. Kozlov, Andrey V. Vlasov

In the field of cryptoeconomics the Ethereum (Ethereum Foundation) project gave opportunity to create “own” cryptocurrency – new token based on its smart-contract platform to everyone without lowlevel programming skills. Then it became obvious that tokens could be used for crowdfunding as the Ethereum did in 2014. Unregulated and easy to access such scheme became popular among related to the blockchain tech startups. It was named Initial Coin Offering (ICO/or ITO). Despite its name, which is similar to IPO, this scheme is usually used for venture funding of a new project instead of expanding already well-established working business. The authors use machine-learning algorithms to classify ICOs and estimate ROI based on public digital data and web-sources. The goal of the research is to develop sustainable and efficient model, which will predict target profit ROI (profit trends) of ICO startup. Data collection and analysis period: Feb-Mar 2018. The prediction model and the application (service) of ICO startups’ selection are developed as the result of the study. Results. There were over 3000 samples of ICO-startups in the research dataset. After cleaning and elimination of outliers, it contained only 518. The number of samples with positive ROI (which means that these ICOs were profitable) was 234. Cross validation metric was confirmed to be accurate. The model achieved 79 % accuracy (average value). To prove this score separated prediction was executed the metrics: for test dataset AUC is 0.78; for profitable samples Precision: 0.76; Recall: 0.9 for profitable; F1-score: 0.82. Discussions. In order to achieve the objectives of this study, various IT components of the service architecture (applications) were developed to monitor, analyze and predict the risks of ICO startups. An artificial neural network was developed to solve the problem of ROI classification and prediction. The average ROI among profitable ICOS was 47 %. Taking into consideration that the crypto market is highly volatile and that there is a possibility that such investments will not bring any profit, this model of monitoring, analysis and prediction can be very valuable for the purposes of critical selection (exclusion) of a number of ICO projects from potential investment. Conclusion. The developed components can be used as a basis of monitoring service of ICO startups. The risk-forecasting model can be improved, foremost, by using the most complete (and wider) set of data. In this case, individual data collection and processing tasks can be performed manually, which will require additional resources. It should be noted that other types of neural networks can be developed for both text analysis and trading data analysis. This may lead to the logic of using a combination of models, which will potentially help to provide the most accurate predictions.

p. 101-109

Authors: Dmitry B. Krylov

The article investigates the influence of the T. Kuhn’s theory of scientific revolutions on the development of accounting science in the USSR and in the Russian Federation. The author analyzes the usage of the T. Kuhn’s term “paradigm” in the USSR and in Russia and considers its application for periodization of the accounting development history. The analysis determines that during the period from the 1980s to the present the term “paradigm” has been constantly used in accounting science. In general, there are two main areas to use this term. Firstly, the selection of 3–4 basic paradigms in the development history of world accounting science, that has become classic in Russia, and their further detailed definition with the purpose of describing and forecasting the ways of accounting science development. Secondly, the identification of new “potential” paradigms, which will become the basis of “normal” science in the near future. The consideration of accounting as an indivisible science that does not have separate scientific directions with its own paradigms and the non-recognition of pre-paradigm periods in the accounting science development are typical for the Russian scientists.

p. 133-135

Authors: Igor Yu. Varjas

The review of the scientific report “Effects of Institutional Differences and Institutional Rent in the Russian Economy” addresses the problem of institutional heterogeneity of Russian business. Based on the results obtained by the team of INP RAS with implementation of analysis of the financial and economic activities of ferrous metallurgy enterprises and banks, the author defines the theory of economic development heterogeneity. The conclusion of the article discusses the certain suggestions on how to use the proposed theoretical developments in fiscal policy.

p. 9-20

Authors: Ilya V. Prilepskiy

Decrease of dependency level between oil prices and ruble exchange rate is among the key goals of a new version of Russia’s fiscal rule. This study analyzes motivation to adopt this goal by reviewing the estimates for impact of exchange rate volatility on economic growth. It proceeds to assessment of commodity-exporting countries experience and considers the effects of fiscal rule implementation on real and nominal exchange rate volatility. Moreover, the author conducts the long-term scenario analysis of ruble exchange rate volatility for different versions of the fiscal rule. The main results are as follows. First, reduction of the exchange rate volatility leads to a modest increase in investment and export growth. Second, in general, adoption of fiscal rules does not result in reduction of the exchange rate fluctuations, though in the case of Russia since 2017 ruble exchange rate has been significantly de-linked from oil prices. Finally, according to scenario analysis compared with other versions of the fiscal rule (2013 Russian version; Norwegian version; targeting non-oil deficit; tying expenditure growth to GDP growth; no fiscal rule) the current Russian version yields a substantial decrease in exchange rate volatility, though its performance could be further improved by introduction of a mechanism for the base oil price modification in case of a long-term fall in actual oil prices below 40$/barrel in constant 2017 dollars (which is the base price in the current version of the rule).

p. 34-46

Authors: Yury M. Gorlin, Victor Y. Lyashok

Nowadays tax incentives are widely used in many countries including Russia. Nevertheless, this tax instrument has a number of significant disadvantages. Firstly, they decrease budget revenues, and at the same time the efficiency of tax incentives usually is not estimated and seems to be not positive. Secondly, a lot of tax incentives can be replaced by more comfortable types of direct expenditures. Finally, as a rule, from an equity standpoint tax exemption is not a good, as recipients of tax exemption are usually wealthy people. This paper discusses main theoretical aspects of tax incentives (with focus on personal income taxation), provides a review of the world taxation practices and analyzes the tax exemptions in Russia. The results of analyses allow to outline the recommendations intended to improve the personal income taxation.

p. 59-70

Authors: Alexander D. Andryakov

This study discusses only one aspect of the public-private partnership (PPP), namely contingent government liabilities of PPP projects. PPP is long and widely used mechanism for infrastructure development in the world. An extensive international experience and recommendations for accounting, reporting, budgeting and managing contingent government liabilities of PPP projects are available to experts and professionals. Russia has relatively recently begun to use PPP mechanism and issues of PPP contingent government liabilities have not been widely discussed in the literature. The author presents a comparison of international experience and Russian practice in dealing with PPP contingent government liabilities, which shows that all these liabilities except state guaranties on private party debt are excluded from budgetary process and management in Russia. It is only partly due to the budget accounting on cash basis adopted in Russia, because international experience presents a variety of mechanisms to overcome problems of this particular accounting system.

p. 83-94

Authors: Samvel S. Lazaryan, Nikita E. German

In order to conduct a conscious economic policy, timely assessment of the main economic indicators, viz GDP, is needed. In this paper the authors justify the reason why an inclusion of query search data may help to produce better nowcasts compared to the currently used Russian GDP models, which are built on the data from official statistical services. The authors also check, whether this hypothesis holds true in the real-time forecasting experiment. For this purpose the authors suggest two competing dynamic factor models: the one, which includes data on the query search frequency, and the other one, which excludes it. The models show that the inclusion of query search data does not change the forecast performance of the model built only upon official economic indicators. At the same time, both models have produced more accurate nowcasts of Russian GDP then AR(1) model did. Finally, the authors try to explain the resulting irrelevance of query search data in nowcasting GDP. The article discusses both fundamental reasons and the pitfalls of the methodology used in this paper, which could have led to such result.

p. 109-119

Authors: Kristina V. Shvandar, Vsevolod Y. Cherkasov

The article discusses the problem of penetration of non-cash payment instruments into the retail market. Settlements without cash facilitate transparency of transactions. Limitation of the allowable amount of cash payment for retail purchases, which has examples in the world, can facilitate counteraction to transactions that hide criminal activity and tax evasion. However, the grounds for large cash payments limitation are convincing when non-cash instruments have penetrated deeply into the small transactions market. Payment cards compete with cash in transactional costs, and their competitiveness depends on the size of interchange fee. The authors assume, that restricting the allowable amount of cash payments would be a rational step for Armenia to restrain shadow economic activity, but non-cash payment instruments should penetrate deeper into the retail market at first. Efficient solutions could be facilitated by a study of costs in the payment system.

p. 128-135

Authors: Anton M. Maryasin

This article studies key differences between assets impairment methodology according to IAS 36 — Impairment of Assets and relevant Russian analogue — Impairment of Assets Federal Standard. Financial system of Russian government sector requires reconsideration of some IFRS provisions. As result, not the whole set of procedures under IAS 36 may be adopted for Russian government sector.

p. 9-22

Authors: Evsey T. Gurvich, Maria A. Ivanova

The paper considers impact of population ageing on the economic growth and sustainability of pension systems. The analysis demonstrates that ageing has negative effect on the labor force and labor productivity, and thus results in a slowdown of economic growth and an increase of public spending. The most effective policy option is to raise the retirement age, while an increase in contribution rates or other taxes is the worst reaction. This recommendation is relevant for any countries at different stages of aging process, for all types of pension systems, for different demographic scenarios. Simultaneously with the raising of the retirement age, it is necessary to implement the policy aimed at improvement of the human capital quality.

p. 34-45

Authors: Olga V. Bogacheva, Oleg V. Smorodinov

Since the beginning of the recent financial and economic crisis (2007–2008), spending reviews have played an important role in Ireland’s efforts to increase the fiscal space available to government for new, higher priority policies. This goal has been achieved by applying a systematic process of identification of ineffective and inefficient saving programs. The authors of the article claim that experience of Ireland in organization of spending review process could be useful for implementation of this instrument in Russia. First, the case of Ireland clearly demonstrates that regular review of baseline expenditures requires more active role from the government and the Ministry of Finance in allocation of all budget resources. It is also obvious that commitment of the top political and official level is vital for the final success in implementation of this instrument in Russia. As for the Ministry of Finance, it should play a key role in designing the spending reviews’ format, advising the top political level on the selection of topics, scope and parameters of spending reviews, and identification of spending options. Second, success of spending reviews in Ireland is backed by strong legal and methodological framework which regulates rights and responsibilities of each participant in the review preparation process. Formation of such framework is the key prerequisites of successful implementation of spending reviews in Russia. Third, it should be noted that Ireland applies various types of spending reviews depending on a goals set. In Russia, it is advisable first to conduct a number of pilot selective reviews focused on government programs and particular ministries and agencies. After accumulating sufficient expertise, it would be appropriate to conduct a comprehensive spending review.

p. 58-69

Authors: Aleksandra L. Suslina, Roman S. Leukhin

In this paper using an overview of existing literature the authors try to find out whether tax incentives are an effective way to boost innovation or there are other factors, which reduce their efficiency in Russia. There is a comparison of tax incentives with government direct support for R&D – the authors conclude that both methods have pros and cons. The article also discusses reasons for low usage of tax incentives in Russia. Moreover, there is a description of key characteristics of the ecosystem necessary for innovation. Based on the provided overview the authors conclude that there is no significant reason to refuse tax incentives usage in Russia. The article provides recommendations to improve tax incentives: research of tax incentives efficiency by the federal government, the “patent box” introduction, creation of tax instruments for innovation stimulation, which can be used by individuals, reduction of barriers to benefits access, discussion of special economic zones efficiency and improvement of their tax regimes etc.

p. 83-96

Authors: Anton I. Votinov, Maria A. Elkina

Dynamic stochastic general equilibrium (DSGE) models are known as a flexible tool for monetary policy analysis. Nowadays this approach is becoming more popular for the analysis of fiscal policy impact on economic development. There are few DSGE models of Russian economy with detailed fiscal sector. In this study a simple DSGE model is developed and calibrated to evaluate the efficiency of fiscal stimulus. In addition, the authors consider the impact of budget consolidation and public-private consumption relationship on fiscal multipliers. The results demonstrate the sensitivity of multipliers to certain parameters. The developed model will form the basis of further research within suggested framework.

p. 108-119

Authors: Milyausha R. Pinskaya, Ori A. Alaverdyan, Nikolay S. Milogolov

The article analyzes legislative novelties in the area of transfer pricing in the Republic of Armenia through the best practices comparison and country’s economic and institutional specifics. The authors’ research approach is based on determination of national economic and institutional special features and outlining the riskiest types of transfer pricing transactions. Through the collected data and the best foreign practices the authors analyze the national transfer pricing rules and policy. As a result of such analysis there are presented several practical recommendations for the modification of tax legislation and transfer pricing rules in the Republic of Armenia. The authors also suggest implementation of possibility to use stock exchange quotes as benchmarks for commodity transactions when applying comparable uncontrolled price method. Introduction of safe harbor rules is also recommended for interests of financial arrangements on related party debt, based on key rates of fiscal markets (Central Bank rate, EURIBOR, LIBOR, SHIBOR and so on). The authors also discuss in details the problems of application of thin capitalization rules in combination with transfer pricing rules and double tax treaties. In addition, the article recommends several practical ideas on streamlining tax administration (setting up transition period without fines and sanctions or testing the existing thresholds for transfer pricing control).

p. 130-135

Authors: Karen I. Alaverdyan, Raffi A. Aleksanyan

The article is focused on a comparative analysis of auditing regulation models existing in the international practice. The authors revealed the main differences between these models and noted that currently in the Republic of Armenia auditing activities are controlled through the state regulation model. The article also determines the five levels of legislative system, which regulates auditing activities in Armenia. In addition, with the help of a number of analytical tools the authors estimate the efficiency of the current system of auditing regulation in the Republic of Armenia.