A Few Words on the Issue of Tax Harmonization in the Customs Union

In accordance with Decision No 3 of the Interstate Council of the Eurasian Economic Community “On the Formation of a Customs Union As Part of the Eurasian Economic Community” (adopted at Bishkek on 10 October 2008) 1, the Treaty came into force as an international act from 10 October 20082. The Russian Federation ratified the Treaty by passing Federal Law of 27 October 2008, No 187-FZ3 (the Republic of Belarus – by Law of the Republic of Belarus of 9 July 2008, No380-З; the Republic of Kazakhstan – by Law of the Republic of Kazakhstan of 24 June 2008, No 44-IV).

In this connection, as early as 23 February 2003, the Presidents of the Russian Federation, the Republic of Kazakhstan, the Republic of Belarus, and Ukraine declared their intention to form a Common Economic Space (CES). In pursuance of that decision, on 19 September 2003, the Agreement on the Formation of the CES and the Concept of the CES were signed by the involved parties. In Russia, the Agreement on the formation of the CES was ratified by the State Duma as of 20 April 2004 (Federal Law of 22 April 2004, No 22-FZ)4 , and came into force on 20 May 2004. The Agreement, likewise in April 2004, was ratified by the parliaments of the Republic of Belarus and Republic of Kazakhstan. Ukraine refused to accede to the Common Economic Space, considering that her participation in this type of integration would bring no benefit.

As the goals of the CES were effectively the same as those of the Eurasian Economic Community (EurAsEC)5, in June 2006 the Customs Union’s member states decided that they should continue to work towards creating a Customs Union as part of the EurAsEC, with due regard for the experience of the CES.

On November 2011, the Heads of States of Belarus, Kazakhstan and Russia, signed a number of multilateral documents, including the Declaration on the Eurasian Economic Integration6, whereby the Common Economic Space was to be launched on 1 January 2012. The CES is based upon the principles laid down by the World Trade Organization and may be acceded to by other states.

In order to establish the CES and ensure its smooth functioning, it is necessary that all the participants in this integrated association should be granted equal terms and conditions for the pursuit of their economic activities. This can be achieved primarily by implementing a common tax policy, as well as by harmonizing the tax legislations of the participants in this form of integration.

At present, harmonization in the Customs Union’s framework is achieved between the tax systems of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation in the field of indirect taxation (VAT and excise duties). In this connection, the following package of international documents was adopted with the purpose of regulating the main directions of levying indirect taxes:

• The Agreement between the Government of the Republic of Belarus, the Government of the Republic of Kazakhstan and the Government of the Russian Federation, of 25 January 2008, “On the Principles for the Collection of Indirect Taxes upon the Export and Import of Goods, the Performance of Work and the Rendering of Services in the Customs Union”;

• The Protocol on the Procedure for the Collection of Indirect Taxes upon the Export and Import of Goods within the Customs Union and on the Mechanism for the Control of Their Payment, of 11 December 2009;

•  The Protocol on the Procedure for the Collection of Indirect Taxes upon the Performance of Work and the Rendering of Services within the Customs Union, of 11 December 2009;

• The Protocol on the Introduction of Alterations in the Agreement of 25 January “On the Principles for the Collection of Indirect Taxes upon the Export and Import of Goods, the Performance of Work and the Rendering of Services within the Customs Union”, of 11 December 2009;

• The Protocol on the Exchange of Electronic Information on the Payment of Indirect Taxes, between the Tax Agencies of the Member States of the Customs Union, with Annexes thereto.

Simultaneously, multiple alterations were introduced in the national legislation of each member state of the Customs Union.

At the same time, one cannot overlook some faults in the available body of documents (including, among other things, the lack of a common terminology; discrepancies in the application of similar terms; different tax rates applied to similar goods; different lists of excisable goods, etc.). At present, in accordance with the Main Directions of the Tax Policy of the Russian Federation for 2013 and the Planning Period of 2014 and 20157, Russia is continuing her efforts aimed at harmonizing the rates of excise duties on tobacco and alcohol products applied by the Customs Union’s members through carrying out negotiations with the other member states of the Customs Union aimed at comprehensive optimization of the integration process.

Thus, it can be concluded that, on the whole, a certain level of harmonization has been achieved between the tax systems of the Customs Union’s member states with regard to indirect taxation issues. However, further efforts are needed – both towards a better indirect taxation harmonization and towards a better harmonization of the tax systems of the Republic of Belarus, the Republic of Kazakhstan, and the Russian Federation, in order to optimize the ongoing integration processes in the framework of the CES.

N.Yu. Korniyenko – Candidate of Legal Sciences, Head of the Tax System Development Department;
N.A. Efimova – Researcher, Tax System Development Department.


1 http://www.tsouz.ru/Docs/IntAgrmnts/Pages/Perechen_MDTS.aspx (the Customs Union’s official website)
2 Sobranie zakonodatel’stva RF [Collection of RF Legislation]. 21 March 2011. No 12. Art. 1552;  Bulleten’ mezhdunarodnykh dogovorov [Bulletin of International Treaties], No 7. 2011.
3 Sobranie zakonodatel’stva RF [Collection of RF Legislation]. 03.11.2008. No 44. Art. 4993.
4 Sobranie zakonodatel’stva RF [Collection of RF Legislation].. 26.04.2004. No 17. Art. 1589.
5 The Treaty Establishing the Eurasian Economic Community was signed on 10 October 2000 by Heads of the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan; its goal is to optimize the efforts aimed at forming the Customs Union and the Common Economic Space, as a direct consequence and continuation of the Treaties Establishing the Customs Union of 9 and 25 January 1995, as well as the Treaty on Customs Union and Common Economic Space of 26 February 1999.
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